Working Paper: CEPR ID: DP8128
Authors: Olympia Bover
Abstract: I model the purchase behavior of main and secondary housing by Spanish households using the panel sample from the first two waves of the Spanish household finance survey (EFF). I estimate discrete hazard models using retrospective and within-period purchase sequences. I also estimate an (S,s) model combining transactions data with longitudinal information on household wealth and housing stock values. I look at the role of adaptive expectations about the rate of return on housing and find they have a positive and significant effect on the demand for houses. This is true for historical and within-period purchase probabilities as well as for the target ratio of housing wealth to total wealth. The volatility of house price growth has a negative effect on purchases for investment but a positive one on purchases for consumption.
Keywords: SS rule; adaptive expectations; house purchases; household finance; housing returns; secondary homes
JEL Codes: D14; G11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| adaptive expectations (D84) | housing demand (R21) |
| higher expected returns (G12) | increased purchase probabilities (M31) |
| house price volatility (R31) | investment purchases (G31) |
| house price volatility (R31) | consumption purchases (E20) |