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Economics Seminar

Author:

• L. Rachel Ngai
  London School of Economics

• Kevin D. Sheedy
  London School of Economics

The majority of transactions in housing market involve moving from one house to another. This process entails a listing (putting up for sale) of an existing house and the eventual purchase of another house. Existing models of the housing market have focused solely on buying and selling decisions, taking moving from the current house as exogenous. This paper builds a model to analyse moving house and presents empirical observations to show the importance of understanding moving decisions. The model generates new dynamics relative to the case of exogenous moving where movers would simply be a random sample of homeowners. Endogenous moving means that those who move come from the bottom of the match quality distribution, which gives rise to a cleansing effect and leads to overshooting of housing-market variables.