Opportunistic Matching in the Housing Market*

Abstract

We construct a model of the housing market in which agents differ in their flow values while searching. Agents enter the market relaxed (with high flow values) but move to a desperate state (low flow values) at a Poisson rate if they have not already transacted. We characterize the equilibrium steady‐state matching pattern and the joint distribution of price and time to sale (for sellers). The expected price conditional on time to sale falls with time spent on the market, whereas the conditional variance of price first rises and then falls with time on the market.

Monetary Policy, Hot Housing Markets and Leverage

“…Specifically, in terms of formalization and notation, this study borrows from the labour markets search frictions survey in Pissarides (2000). The idea that housing market search frictions are important for the evolution of house prices and transaction volume has been explored, among other contributions, in Wheaton (1990), Williams (1995), Krainer (2001), Albrecht et al (2007), Novy-Marx (2009), Piazzesi and Schneider (2009) and Ngai and Tenreyro (2009). This paper applies these insights to study the interaction between search frictions in the housing market and access to mortgage finance.…”

“…Genesove and Mayer (2001) propose that volume may dry up in times of falling house prices because households are averse to realizing losses on their housing investment. In contrast, this paper explains time-variation in housing transaction volumes based on the idea that the real estate market is characterized by search frictions (following Wheaton (1990), Williams (1995), Krainer (2001), Albrecht et al (2007), Novy-Marx (2009), Piazzesi and Schneider (2009) and Ngai and Tenreyro (2009). The aim of this study is to explore the consequences of this housing liquidity response for household access to mortgages.…”

Motivated sellers and predation in the housing market

“…The model, therefore, is potentially applicable in this setting as well and anecdotal evidence suggests that the main results of the paper (…re sales and predation) indeed hold true in the OTC markets. 1 This paper belongs to a literature that studies the housing market using search theory, e.g. see Yavas and Yang [21], Krainer [14], Wheaton [19] and Albrecht et al [1], among others.…”

“…1 This paper belongs to a literature that studies the housing market using search theory, e.g. see Yavas and Yang [21], Krainer [14], Wheaton [19] and Albrecht et al [1], among others. The paper by Albrecht et al is perhaps the closest to our model in terms of motivation and setup; however, it is based on complete information while ours is based on incomplete information.…”

Fairness, Price Stickiness, and History Dependence in Decentralized Trade

“…1 See, e.g., Mortensen and Pissarides (1999) or Rogerson et al (2005) for labor search models, Krainer and LeRoy (2002) or Albrecht et al (2007) for housing markets, and Shi (2001) or Rocheteau and Wright (2005) This paper investigates the implications that social preferences have for the stationary strategic equilibrium of such a decentralized market. Agents are supposed to be averse to unfairly unfavorable as well as unfairly favorable deals in the spirit of Fehr and Schmidt (1999), 2 but we stay rather close to standard individualistic preferences: the negative weights on advantageous and disadvantageous deviations from what is considered as the fair benchmark are such that utility remains strictly increasing in own surplus share.…”