Winners and Losers in Housing Markets

58 Pages Posted: 16 Aug 2010

See all articles by Nobuhiro Kiyotaki

Nobuhiro Kiyotaki

Princeton University - Department of Economics

Alexander Michaelides

Imperial College Business School; Centre for Economic Policy Research (CEPR)

Kalin Nikolov

European Central Bank (ECB)

Multiple version iconThere are 2 versions of this paper

Date Written: August 2011

Abstract

This paper is a quantitatively-oriented theoretical study into the interaction between housing prices, aggregate production, and household behavior over a lifetime. We develop a life-cycle model of a production economy in which land and capital are used to build residential and commercial real estates. We find that, in an economy where the share of land in the value of real estates is large, housing prices react more to an exogenous change in expected productivity or the world interest rate, causing a large redistribution between net buyers and net sellers of houses. Changing financing constraints, however, has limited effects on housing prices.

Keywords: Collateral constraints., Housing Prices, Land, Life cycle, Real estate

JEL Classification: E20, G10, R20, R30

Suggested Citation

Kiyotaki, Nobuhiro and Michaelides, Alexander and Nikolov, Kalin, Winners and Losers in Housing Markets (August 2011). CEPR Discussion Paper No. DP7953. Available at SSRN: https://ssrn.com/abstract=1658260

Nobuhiro Kiyotaki (Contact Author)

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

Alexander Michaelides

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Kalin Nikolov

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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