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ENDOGENOUS SOURCES OF VOLATILITY IN HOUSING MARKETS: THE JOINT BUYER–SELLER PROBLEM
Author(s) -
Anenberg Elliot,
Bayer Patrick
Publication year - 2020
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12454
Subject(s) - volatility (finance) , metropolitan area , economics , transaction cost , database transaction , empirical evidence , monetary economics , business cycle , microeconomics , econometrics , macroeconomics , medicine , philosophy , epistemology , pathology , computer science , programming language
This article presents new empirical evidence that internal movement—selling one home and buying another—by existing homeowners within a metropolitan housing market is especially volatile and a substantial driver of fluctuations in transaction volume over the housing market cycle. We develop a search model that shows that the strong procyclicality of internal movement is driven by the cost of simultaneously holding two homes, which varies endogenously over the cycle. The estimated model shows that frictions related to this joint buyer–seller problem substantially amplify cyclical price volatility in housing markets.