NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Elliot Anenberg

Federal Reserve, Board of Governors
Washington, DC

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NBER Working Papers and Publications

April 2013Endogenous Sources of Volatility in Housing Markets: The Joint Buyer-Seller Problem
with Patrick Bayer: w18980
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 b...
 
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