Household Housing Demand: Empirical Analysis and Theoretical Reconciliation

Posted: 23 Mar 2012

See all articles by Richard Dusansky

Richard Dusansky

University of Texas at Austin

Cagatay Koc

University of Texas at Arlington

Ilke Onur

affiliation not provided to SSRN

Date Written: 2010

Abstract

Since owner-occupied housing is partly a financial asset, expectations of capital gain or loss play a role in housing demand. In recent years, some "hot" housing markets have exhibited an increase in demand when housing prices rise and a decrease when they fall, suggesting the presence of capital gains forces that outweigh the traditional neoclassical demand response associated with the standard consumer good. To explore whether this behavior is systematic, we estimate individual household housing demand equations for two large and geographically diverse metropolitan areas, San Francisco and Atlanta. The data base consists of forty nine Public Use Microdata Area samples. The econometric results indicate that own-housing demand is downward sloping in one market but upward sloping in the other. These disparate results are reconciled by showing that they are consistent with two different and explicit special case predictions of the same theoretical model of housing demand and reflect the differing relative strengths of a standard consumption good demand response and of an asset based capital gains effect.

Keywords: Housing demand, Capital gains effect, Price expectations, Intertemporal uncertainty, Upward sloping demand

Suggested Citation

Dusansky, Richard and Koc, Cagatay and Onur, Ilke, Household Housing Demand: Empirical Analysis and Theoretical Reconciliation (2010). Journal of Real Estate Finance and Economics, Vol. 44, No. 4, 2010, Available at SSRN: https://ssrn.com/abstract=2027532

Richard Dusansky (Contact Author)

University of Texas at Austin ( email )

2317 Speedway
Austin, TX 78712
United States
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1-512-471-3510 (Fax)

Cagatay Koc

University of Texas at Arlington ( email )

415 S West St Apt no 205
Arlington, TX 76013
United States
1-817-272-3383 (Phone)
1-817-272-3145 (Fax)

Ilke Onur

affiliation not provided to SSRN

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