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Author: Alina Arefeva Publisher: ISBN: Category : Languages : en Pages :
Book Description
This dissertation studies the implications of search frictions and pricing mechanisms for house prices. Many economists believe that US house prices fluctuate over time between booms and busts, and are volatile relative to fundamentals, such as rents or income in a local housing market. This excess volatility is a puzzle relative to conventional models of house prices in the literature. My dissertation aims to explain this puzzle. To explain the high volatility of house prices I substitute hypothesis of the Nash bargaining price determination, prevailing in the literature, with the auction price determination. With Nash bargaining a seller bargains with a buyer one-to-one. In practice, especially so in booms, a seller deals with multiple buyers simultaneously and sells to the highest bidder. A natural way to model this is to use an auction model. When house prices are determined in an auction instead of Nash bargaining, house prices fluctuate more, which helps explain the volatility of house prices and fluctuations between booms and busts. The dissertation consists of two related essays on the microstructure of the housing markets. The first essay explores the consequences of the pricing mechanisms for the quantitative behavior of the house prices over time in an equilibrium search model of a local housing market. The second essay asks whether the equilibrium allocations of these search models are constrained efficient. The first essay shows that the type of the pricing mechanism crucially affects the volatility of the house prices in response to the shocks to a local housing market. Specifically, if the house prices are determined in auctions rather than by one-to-one negotiation a la Nash bargaining, then the house prices are four to fifteen time more volatile if shocks to the housing market affect the participation of buyers, for example, shock to the inflow of buyers or rents. If the shocks affect the discount factor or the expectation of the housing services, then it is the opposite, that is the house prices are more volatile in the Nash bargaining model than in the auction model. Many economists agree that the housing boom-bust episode 2000-2007 was fueled by the inflow of the buyers due to the decrease in the mortgage lending standards. For these types of shocks, the auction model produces highly volatile house price growth, high enough to match the observed volatility in the local housing markets in the US. The intuition for higher volatility in the auctions as compared to the Nash bargaining comes from the differences in the outside options of the seller in the two models. The seller in the Nash bargaining model negotiates with only one buyer per period, while the seller in the auction model can meet several buyers at the same time. Thus, in the auction model the outside option of the seller is to wait till tomorrow to potentially meet several buyers, while in the Nash bargaining model the seller can enjoy a company of only one buyer. In the hot market there are many interested buyers on the market which is capitalized in the option value to sell. Because of the sensitivity of the option value to sell to the current state of the market, the house prices fluctuate more. The second essay asks whether the dynamic equilibrium model of the random search with auctions, proposed in the first essay, produces a socially efficient allocation, constrained by search frictions. The main result is that the equilibrium random search model with an auction produces an inefficient allocation. The inefficiency in the random search model comes from the monopoly power of the seller in the auction model. Buyers are visiting sellers without observing the ex-post terms of trade, and, after the meeting has occurred, the seller becomes a local monopolist, because the buyer has to incur search and waiting costs to meet another seller. The distortion can be corrected by allowing the sellers to advertise and commit to the trading mechanisms by posting the reservation price for the auction and commit to this price. Having observed these prices, the buyers then direct their search to the seller with the most attractive terms or with least competition. This alleviates the externality present in the random search model. The paper extends this result from the static setting, analyzed in the literature, to the dynamic setting.
Author: Alina Arefeva Publisher: ISBN: Category : Languages : en Pages :
Book Description
This dissertation studies the implications of search frictions and pricing mechanisms for house prices. Many economists believe that US house prices fluctuate over time between booms and busts, and are volatile relative to fundamentals, such as rents or income in a local housing market. This excess volatility is a puzzle relative to conventional models of house prices in the literature. My dissertation aims to explain this puzzle. To explain the high volatility of house prices I substitute hypothesis of the Nash bargaining price determination, prevailing in the literature, with the auction price determination. With Nash bargaining a seller bargains with a buyer one-to-one. In practice, especially so in booms, a seller deals with multiple buyers simultaneously and sells to the highest bidder. A natural way to model this is to use an auction model. When house prices are determined in an auction instead of Nash bargaining, house prices fluctuate more, which helps explain the volatility of house prices and fluctuations between booms and busts. The dissertation consists of two related essays on the microstructure of the housing markets. The first essay explores the consequences of the pricing mechanisms for the quantitative behavior of the house prices over time in an equilibrium search model of a local housing market. The second essay asks whether the equilibrium allocations of these search models are constrained efficient. The first essay shows that the type of the pricing mechanism crucially affects the volatility of the house prices in response to the shocks to a local housing market. Specifically, if the house prices are determined in auctions rather than by one-to-one negotiation a la Nash bargaining, then the house prices are four to fifteen time more volatile if shocks to the housing market affect the participation of buyers, for example, shock to the inflow of buyers or rents. If the shocks affect the discount factor or the expectation of the housing services, then it is the opposite, that is the house prices are more volatile in the Nash bargaining model than in the auction model. Many economists agree that the housing boom-bust episode 2000-2007 was fueled by the inflow of the buyers due to the decrease in the mortgage lending standards. For these types of shocks, the auction model produces highly volatile house price growth, high enough to match the observed volatility in the local housing markets in the US. The intuition for higher volatility in the auctions as compared to the Nash bargaining comes from the differences in the outside options of the seller in the two models. The seller in the Nash bargaining model negotiates with only one buyer per period, while the seller in the auction model can meet several buyers at the same time. Thus, in the auction model the outside option of the seller is to wait till tomorrow to potentially meet several buyers, while in the Nash bargaining model the seller can enjoy a company of only one buyer. In the hot market there are many interested buyers on the market which is capitalized in the option value to sell. Because of the sensitivity of the option value to sell to the current state of the market, the house prices fluctuate more. The second essay asks whether the dynamic equilibrium model of the random search with auctions, proposed in the first essay, produces a socially efficient allocation, constrained by search frictions. The main result is that the equilibrium random search model with an auction produces an inefficient allocation. The inefficiency in the random search model comes from the monopoly power of the seller in the auction model. Buyers are visiting sellers without observing the ex-post terms of trade, and, after the meeting has occurred, the seller becomes a local monopolist, because the buyer has to incur search and waiting costs to meet another seller. The distortion can be corrected by allowing the sellers to advertise and commit to the trading mechanisms by posting the reservation price for the auction and commit to this price. Having observed these prices, the buyers then direct their search to the seller with the most attractive terms or with least competition. This alleviates the externality present in the random search model. The paper extends this result from the static setting, analyzed in the literature, to the dynamic setting.
Author: Susan J. Smith Publisher: Routledge ISBN: 1317968034 Category : Business & Economics Languages : en Pages : 217
Book Description
House prices and mortgage debt have moved to centre stage in the management of national economies, regional development and neighbourhood change. Describing, analysing and understanding how housing markets work within and across these scales of economy and society has never been more urgent. But much more is known about the macro-scales than the microstructures; and about the economic rather than social drivers of housing market dynamics. This book redresses the balance. It shows that housing markets are social, cultural and psychological – as well as economic – affairs. This multidisciplinary approach is helpful in understanding the economic staples of supply, demand, price and information. It also casts new light on the emotional and political economy of markets.
Author: Jerome Rothenberg Publisher: University of Chicago Press ISBN: 9780226729510 Category : Business & Economics Languages : en Pages : 570
Book Description
This powerful new theoretical approach to analyzing urban housing problems and the policies designed to rectify them will be a vital resource for urban planners, developers, policymakers, and economists. The search for the roots of serious urban housing problems such as homelessness, abandonment, rent burdens, slums, and gentrification has traditionally focused on the poorest sector of the housing market. The findings set forth in this volume show that the roots of such problems lie in the relationships among different parts of the market—not solely within the lower-quality portion—though that is where problems are most dramatically manifested and housing reforms are myopically focused. The authors propose a new understanding of the market structure characterized by a closely interrelated array of quality submarkets. Their comprehensive models ground a unified theory that accounts for demand by both renters and owner occupants, supply by owners of existing dwellings, changes in the stock of housing due to conversions and new construction, and interactions across submarkets.
Author: Geoffrey Meen Publisher: Springer Science & Business Media ISBN: 1461516730 Category : Business & Economics Languages : en Pages : 279
Book Description
Spatial fixity is one of the characteristics that distinguishes housing from most other goods and services in the economy. In general, housing cannot be moved from one part of the country to another in response to shortages or excesses in particular areas. The modelling of housing markets and the interlinkages between markets at different spatial levels - international, national, regional and urban - are the main themes of this book. A second major theme is disaggregation, not only in terms of space, but also between households. The book argues that aggregate time-series models of housing markets of the type widely used in Britain and also in other countries in the past have become less relevant in a world of increasing income dispersion. Typically, aggregate relationships will break down, except under special conditions. We can no longer assume that traditional location or tenure patterns, for example, will continue in the future. The book has four main components. First, it discusses trends in housing markets both internationally and within nations. Second, the book develops theoretical housing models at each spatial scale, starting with national models, moving down to the regional level and, then, to urban models. Third, the book provides empirical estimates of the models and, finally, the models are used for policy analysis. Analysis ranges over a wide variety of topics, including explanations for differing international house price trends, the causes of housing cycles, the role of credit markets, regional housing market interactions and the role of housing in urban/suburban population drift.
Author: Richard K. Green Publisher: The Urban Insitute ISBN: 9780877667025 Category : Political Science Languages : en Pages : 240
Book Description
The first book that explains the economics of housing policy for a general audience. Planners, government officials, and public policy students will find that the economic perspective is a very powerful and useful way to examine these issues. The authors provide a broad review of the market for housing services in the U.S., including a conceptual framework, an overview of housing demand and supply, methods for measuring prices and quantities, and sources of basic data on markets. They cover housing programs and polices, and offer answers to policy questions that are of current interest. The book has been field-tested in graduate and undergraduate courses in urban and housing economics at the University of Wisconsin, the University of California--Berkeley, The University of Pennsylvania, and others. This book is also sure to be useful to policymakers, advocates, economists, and anyone interested in a clear picture of how housing markets function. Published in cooperation with the American Real Estate and Urban Economics Association (AREUEA).
Author: Leland S. Burns Publisher: Springer Science & Business Media ISBN: 1468451618 Category : Business & Economics Languages : en Pages : 218
Book Description
This book's title betrays at once that it belongs in the forecast literature. Peering into the future is a notoriously treacherous venture. Nevertheless, it has become a prac tice endemic to the business and government worlds as well as to academia, especially economics. We like to be lieve that the enormous growth of forecasting in the face of some disappointments reflects real needs of decision makers (as well as the general public's well-warranted curiosity about the future). Fashion alone could hardly explain the sustained increase in the market for forecast services during the past few decades. Some professionals insist on fine distinctions be tween the forecast, the projection, the prediction-and the prophecy. The differences are more semantic than real, as the mandatory resort to Webster confirms. The entry "forecast" includes references to prediction and prophecy without differentiation, while "projection" is defined, among other things, as prediction or "advance estimate." We use mainly the term projections because v PREFACE vi much of our statistical research is based on forward es timates of population and households by the U.S. Bu reau of the Census which the bureau itself, the greatest fountain of data in the world, records as projections.
Author: Konrad Stahl Publisher: Springer ISBN: 9783540151937 Category : Business & Economics Languages : en Pages : 200
Book Description
The present volume is an outgrowth of several years' interactions be tween U. S. American and W. -German economists interested in analyzing the structure and functioning of housing markets, and the impacts of govern mental policies on these markets. Such an interaction turns out to be fruitful in several respects. Unquestionably, German economists can learn a lot from the high level of sophistication exhibited in much of the American literature. However, this is not a one way road of learning and the adoption of concepts, for the following reason. Most of the analysis presented in that literature hinges on the use of the standard microeco nomics textbook tools. Now, even a casual observation of housing markets in European countries reveals that behavior and conduct in these markets do not follow the assumptions presumed in this mode of analysis, which calls into question the uncritical employment of that tool kit. This has important consequences for policy analysis and indeed, for some principal attitudes towards housing policy, and points sharply to the need for developing analytical concepts that take up more of the pecul iarities of housing market behavior and conduct. While such a develop ment may be particularly warranted in view of European housing markets, we maintain this to be the case in view of the American housing market as well.
Author: Rob Nijskens Publisher: Springer ISBN: 3030116743 Category : Business & Economics Languages : en Pages : 220
Book Description
This open access book discusses booming housing markets in cities around the globe, and the resulting challenges for policymakers and central banks. Cities are booming everywhere, leading to a growing demand for urban housing. In many cities this demand is out-pacing supply, which causes house prices to soar and increases the pressure on rental markets. These developments are posing major challenges for policymakers, central banks and other authorities responsible for ensuring financial stability, and economic well-being in general.This volume collects views from high-level policymakers and researchers, providing essential insights into these challenges, their impact on society, the economy and financial stability, and possible policy responses. The respective chapters address issues such as the popularity of cities, the question of a credit-fueled housing bubble, the role of housing supply frictions and potential policy solutions. Given its scope, the book offers a revealing read and valuable guide for everyone involved in practical policymaking for housing markets, mortgage credit and financial stability.
Author: Franklin Allen Publisher: Pearson Prentice Hall ISBN: 0137011601 Category : Business & Economics Languages : en Pages : 214
Book Description
Explains the financial history leading to the mortgage meltdown and assesses today's housing finance systems in the United States and abroad.
Author: Alina Arefeva
Author: Alina Arefeva
Author: Susan J. Smith
Author: Jerome Rothenberg
Author: Geoffrey Meen
Author: A. Goodman
Author: Richard K. Green
Author: Leland S. Burns
Author: Konrad Stahl
Author: Rob Nijskens
Author: Franklin Allen