Working Paper: NBER ID: w17723
Authors: Tim Landvoigt; Monika Piazzesi; Martin Schneider
Abstract: This paper uses an assignment model to understand the cross section of house prices within a metro area. Movers' demand for housing is derived from a lifecycle problem with credit market frictions. Equilibrium house prices adjust to assign houses that differ by quality to movers who differ by age, income and wealth. To quantify the model, we measure distributions of house prices, house qualities and mover characteristics from micro data on San Diego County during the 2000s boom. The main result is that cheaper credit for poor households was a major driver of prices, especially at the low end of the market.
Keywords: Housing Markets; Capital Gains; Credit Conditions
JEL Codes: E21; G10; R20
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| availability of cheaper credit (G21) | housing demand (R21) |
| housing demand (R21) | housing prices (R31) |
| availability of cheaper credit (G21) | higher capital gains in lower end of market (G19) |
| improved credit conditions (E51) | relative prices of lower-quality houses (R31) |
| composition of houses transacted (R31) | prices at the low end (P22) |
| interaction between mover characteristics and house qualities (R21) | observed price dynamics (C69) |