Skip to main content

Endogenous Sources of Volatility in Housing Markets: The Joint Buyer-Seller Problem

Publication ,  Other
Anenberg, E; Bayer, P
Published in: Economic Research Initiatives at Duke (ERID)
December 5, 2014

This paper 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 the main driver of fluctuations in transaction volume over the housing market cycle. We develop a dynamic search equilibrium model that shows that the strong pro-cyclicality of internal movement is driven by the cost of simultaneously holding two homes, which varies endogenously over the cycle. We estimate the model using data on prices, volume, time-on-market, and internal moves drawn from Los Angeles from 1988-2008 and use the fitted model to show that frictions related to the joint buyer-seller problem: (i) substantially amplify booms and busts in the housing market, (ii) create counter-cyclical build-ups of mismatch of existing owners with their homes, and (iii) generate externalities that induce significant welfare loss and excess price volatility.

Duke Scholars

Published In

Economic Research Initiatives at Duke (ERID)

Publication Date

December 5, 2014

Issue

141
 

Citation

APA
Chicago
ICMJE
MLA
NLM
Anenberg, E., & Bayer, P. (2014). Endogenous Sources of Volatility in Housing Markets: The Joint Buyer-Seller Problem. Economic Research Initiatives at Duke (ERID).
Anenberg, E., and P. Bayer. “Endogenous Sources of Volatility in Housing Markets: The Joint Buyer-Seller Problem.” Economic Research Initiatives at Duke (ERID), December 5, 2014.
Anenberg E, Bayer P. Endogenous Sources of Volatility in Housing Markets: The Joint Buyer-Seller Problem. Economic Research Initiatives at Duke (ERID). 2014.
Anenberg, E., and P. Bayer. “Endogenous Sources of Volatility in Housing Markets: The Joint Buyer-Seller Problem.” Economic Research Initiatives at Duke (ERID), no. 141, 5 Dec. 2014.
Anenberg E, Bayer P. Endogenous Sources of Volatility in Housing Markets: The Joint Buyer-Seller Problem. Economic Research Initiatives at Duke (ERID). 2014.

Published In

Economic Research Initiatives at Duke (ERID)

Publication Date

December 5, 2014

Issue

141