The Ins and Arounds in the US Housing Market

Working Paper: CEPR ID: DP10041

Authors: Rüdiger Bachmann; Daniel Cooper

Abstract: In the U.S., 15 percent of households move in a given year. This result is based on data from the Panel Study of Income Dynamics on gross flows within and between the two segments of the housing market - renter-occupied properties and owner-occupied properties. The gross flows between these two segments are four times larger than the net flows. From a secular perspective, housing turnover exhibits a hump-shaped pattern between 1970 and 2000, which this paper attributes to changes in the age composition of the U.S. population. At higher frequencies, housing turnover is procyclical and tends to lead the business cycle and real house prices. By taking a two-segment view of the U.S. housing market and by documenting carefully the empirics of turnover within and between these segments, the paper provides important moments for and gives empirical guidance to the design, calibration, and evaluation of micro-founded, dynamic, and quantitative models of the U.S. housing market.

Keywords: housing market; housing turnover; net and gross flows; PSID

JEL Codes: E30; E32; R21

Causal Claims

Cause	Effect
housing turnover in the US is procyclical (R21)	economic activity increases (E20)
higher turnover originating from the renter-occupied segment precedes movements in the business cycle (R21)	movements in real house prices (R31)
fluctuations in housing turnover are largely driven by within-segment flows (R21)	economic conditions (E66)
moves from homeownership to renting are acyclical (R21)	economic downturns force homeowners to downsize (R21)
decline in housing turnover rates over time can be largely explained by an age composition effect (R21)	share of young households has decreased (G59)
cyclical nature of housing turnover supports narrative of individuals moving in response to better economic opportunities (R21)	poor economic conditions (P46)