Frictions in the Housing Market

Hva er det som driver prisutviklingen og prisfluktuasjonene i boligmarkedet? En rekke teorier er lansert. I dette prosjektet analyserer vi betydningen av transaksjonsrekkefølgen ved flytting, det vil si hvorvidt boligeiere som flytter fra en bolig til en annen kjøper ny bolig før de selger den gamle eller motsatt. Vi benytter et omfattende datasett som gir detaljert informasjon om boligtransaksjoner i store byer i Norge. En viktig variabel i datasettet er andelen boligeiere som flytter lokalt, det vil si i samme bydel. Vi benytter en såkalt «shift-share» analyse. Vi finner at når andelen som kjøper før de selger nasjonalt går opp, påvirkes prisene mer i bydeler der mange flytter lokalt enn i bydeler der få flytter lokalt. Mer spesifikt finner vi at en 10 prosents økning i antallet individer som kjøper først nasjonalt øker prisene med 5 prosent mer, og reduserer tiden det tar å selge en bolig med 10 prosent mer, når andelen som kjøper først i en bydel øker med ett standardavvik. Vi argumenterer for at dette skyldes at stramheten i markedet, det vil si hvor mange kjøpere det er relativt til selgere, øker når flere kjøper først, og at effekten er særlig sterk i markeder der mange flytter lokalt. Effektene vi finner på boligprisene er betydelige. Som en illustrasjon kan omkring en tredjedel av boligprisfallet i Oslo og København under finanskrisen i 2008 tilskrives et fall i andelen som kjøpte før de solgte boligen sin.

We assemble a unique data set, which we combine with a novel shift-share instrument for changes in the market tightness in a local housing market. Using this shift-share design and quarterly neighborhood-level data, we show that local housing markets with a larger share of moving owners, which are thus more exposed to changes in the buy-first propensity, experience larger changes in house prices and time-to-sell. We, therefore, find that large moves in the buy-first propensity are responsible for around one-third of the fall in house prices in Oslo and Copenhagen during the 2008 global financial crisis. In terms of impact, we envision that the results obtained in this project would provide a new perspective on the drivers of house price volatility. Moreover, the project results have important policy implications regarding macro-prudential and stabilization policies aimed at the housing market.

The housing market is key for understanding financial and banking crises. Similar to other financial markets, the housing market exhibits excess volatility -- house prices are more volatile relative to both rental prices and aggregate income. Furthermore, a large share of the banks? collateral is housing. One of the questions of this project is to look for direct evidence on whether the transaction sequence choices of moving homeowners -- the choice between ?buying first? (and then selling) and ?selling first? (and then buying) -- is an important contributing factor to house price volatility. In addition, we would like to understand whether changes in credit market conditions such as the availability of cheap short-term bridge loans may affect housing prices by influencing the transaction sequence of movers. The results from this project will be particularly important for macroprudential policy. For example, subsidies or taxes on bridge loans may prove an important tool for reducing housing market volatility and supporting financial stability. The second question in the project asks how the inattention of household to an important aspect in the transaction value of the house - cooperative debt - affects home acquisition decisions. Lacking enough information on the amount and costs of the latter, households may end up with large debt exposures that they did not intend to. If so, this can increase expected default rates with implications for financial stability. By studying the example of a policy measure that decreased the attractiveness of co-op debt (hidden) compared to personal debt, we expect to find positive consequences for financial stability. In a later stage, we plan to study a second measure that increases attractiveness of co-op debt (even when it is hidden) to estimate its potentially negative consequences on household indebtedness.