Affiliation:
1. Board of Governors of the Federal Reserve System (email: )
Abstract
Housing demand stimulus produces a multiplier effect by freeing up owners attempting to sell their current home, allowing them to reenter the market as buyers. Exploiting a shock to first-time home buyer demand caused by a cut in mortgage insurance premiums, we find that homeowners buy their next home sooner when the probability of their current home selling increases. We build and calibrate a search model that explains these findings as a result of homeowners avoiding the cost of owning two homes simultaneously. Simulations demonstrate that stimulus to home buying generates a substantial multiplier effect, particularly in cold markets. (JEL R21, R31, R38)
Publisher
American Economic Association
Subject
General Economics, Econometrics and Finance
Cited by
1 articles.
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