The order of buying and selling: Multiple equilibria in the housing market

F.J.T. Sniekers

Research output: Working paperProfessional

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Abstract

Moving between owner-occupied houses requires both buying and selling. During the Great Recession, the majority of movers sold their old houses before buying new ones, while in the preceding years the majority first bought new houses. In an equilibrium search model, by choosing the order of buying and selling, households affect the composition of buyer and seller types in the market. Because of their different outside options, different types bargain for different prices. Since prices have an impact on the incentives to enter the market as buyer or seller, a complementarity in the order of buying and selling exists. The resulting multiple equilibria can explain observed differences in trading volumes. Moreover, when all movers first buy and therefore own two houses for some time, the fraction of people paying double housing expenses is lower than when households enter as buyers and sellers simultaneously, due to a smaller time to sale.
Original languageEnglish
Place of PublicationAmsterdam
PublisherUniversity of Amsterdam
Number of pages40
Publication statusPublished - 2014

Publication series

NameCeNDEF Working Paper
No.14-02

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