When Money Moves In: The Consequences of Housing Wealth

Abstract

We construct a novel dataset tracking millions of households across home purchases covering 25 years of moves within the U.S. We demonstrate that information frictions in residential real estate markets cause movers with exogenous increases in housing wealth to pay a premium for their next home, relative to both time-varying local prices as well as time-invariant property characteristics. These decisions spill over to the broader housing market. In aggregate, the flow of housing equity gains into an area causes upward regional price pressure—a 10% increase in equity gain amongst incoming movers causes 0.4 percentage point higher house price growth.

Keywords: Household finance, financial constraints, house prices, migration, real estate

JEL Classification: G51, R21, R31, D10