Buying First or Selling First in Housing Markets

64 Pages Posted: 23 Jan 2015

See all articles by Espen R. Moen

Espen R. Moen

BI Norwegian Business School; Centre for Economic Policy Research (CEPR)

Plamen Nenov

BI Norwegian Business School

Florian Sniekers

University of Amsterdam

Date Written: January 2015

Abstract

Housing transactions by owner-occupiers take two steps, purchase of a new property and sale of the old housing unit. This paper shows how the transaction sequence decision of owner-occupiers depends on, and in turn, affects housing market conditions in an equilibrium search-and-matching model of the housing market. We show that home-owners prefer to buy first whenever there are more buyers than sellers in the market. This behavior leads to multiple steady state equilibria and to self-fulfilling fluctuations in prices and time-on-market. Equilibrium switches creates large fluctuations in the housing market, which are broadly consistent with stylized facts on the housing cycle.

Keywords: housing market, order of transactions, search frictions, strategic complementarities

JEL Classification: R21, R31

Suggested Citation

Moen, Espen R. and Nenov, Plamen and Sniekers, Florian, Buying First or Selling First in Housing Markets (January 2015). CEPR Discussion Paper No. DP10342, Available at SSRN: https://ssrn.com/abstract=2554416

Espen R. Moen (Contact Author)

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Plamen Nenov

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

Florian Sniekers

University of Amsterdam ( email )

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