Explaining the evolution of the U.S housing market

Byoung Hoon Seok, Hye Mi You

Research output: Contribution to journalArticlepeer-review

3 Scopus citations

Abstract

Over the past few decades, both the relative price of housing structures and housing services consumption relative to nondurables increased significantly in the United States. This paper explores demand-side factors such as an increase in idiosyncratic earnings risks and changes in housing institutions as potential explanations for the phenomenon. We build a general equilibrium incomplete markets model of housing and compare two steady states that correspond to the 1967 and 2000 U.S. economies. Our model can generate the simultaneous increase in the relative price of houses and housing services consumption relative to nondurables. We find that the increased earnings risks are crucial in replicating this pattern.

Original languageEnglish
Pages (from-to)568-589
Number of pages22
JournalMacroeconomic Dynamics
Volume23
Issue number2
DOIs
StatePublished - 1 Mar 2019

Keywords

  • Housing Market
  • Idiosyncratic Earnings Risks
  • Precautionary Savings

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