Housing Purchases and the Dynamics of Housing Wealth

Olympia Bover

Banco de España - Research Department; Centre for Economic Policy Research (CEPR)

December 16, 2010

Banco de Espana Working Paper No. 1036

I model the purchase behavior of main and secondary housing by Spanish households using the panel sample from the first two waves of the Spanish household finance survey (EFF). I estimate discrete hazard models using retrospective and within-period purchase sequences. I also estimate an (S,s) model combining transactions data with longitudinal information on household wealth and housing stock values. I look at the role of adaptive expectations about the rate of return on housing and find they have a positive and significant effect on the demand for houses. This is true for historical and within-period purchase probabilities as well as for the target ratio of housing wealth to total wealth. The volatility of house price growth has a negative effect on purchases for investment but a positive one on purchases for consumption.

Number of Pages in PDF File: 43

Keywords: Household finance, house purchases, secondary homes, housing returns, adaptive expectations, (S,s) rule

JEL Classification: D14, G11

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Date posted: December 18, 2010  

Suggested Citation

Bover, Olympia, Housing Purchases and the Dynamics of Housing Wealth (December 16, 2010). Banco de Espana Working Paper No. 1036. Available at SSRN: https://ssrn.com/abstract=1726338 or http://dx.doi.org/10.2139/ssrn.1726338

Contact Information

Olympia Bover (Contact Author)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Banco de España - Research Department ( email )
Alcala 50
28014 Madrid
+34 91 338 5979 (Phone)
+34 91 338 5678 (Fax)
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