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Title: Owner-occupied Housing as an Investment, Regional House Price Cycles and Residential Sorting

Citation Type: Working Paper

Publication Year: 2011

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Abstract: We develop a dynamic multi-region model, with uctuating regional house prices,where an owner-occupied households location choice depends on its current wealthand its current type and involves both consumption and investment considerations.The relative strength of the consumption motive and the investment motive in thelocation choice determines the equilibrium pattern of residential sorting, with astrong investment (consumption) motive implying sorting according to the type(wealth). The model predicts a negative relation between the size of house priceuctuations and the degree of residential sorting in the type dimension. Also, moversshould be more sorted than stayers in the type dimension. These predictions areconsistent with evidence from US metropolitan areas when income, education andage are used as proxies for household type.

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Authors: Kauppi, Heikki; Haavio, Markus

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Data Collections: IPUMS USA

Topics: Housing and Segregation, Other

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