OPTIMAL HOUSING PRICE TO MAXIMIZE THE UTILITY OF RATIONAL HOUSING BUYERS

When housing prices deviate from normal prices during a housing boom, salaried workers cannot afford the higher prices. However, housing prices are affected by many factors, and housing has both a consumption function and investment motives. This paper argues that an appropriate house price can be b...

Full description

Saved in:
Bibliographic Details
Published in:Academia economic papers 2018-03, Vol.46 (1), p.69-97
Main Authors: Hung, Chih-Hsing, Chung, Wu-Tien
Format: Article
Language:Chinese
Subjects:
Buyers
Economic theory
Economics
Housing
Housing prices
Risk aversion
Studies
Utility functions
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:When housing prices deviate from normal prices during a housing boom, salaried workers cannot afford the higher prices. However, housing prices are affected by many factors, and housing has both a consumption function and investment motives. This paper argues that an appropriate house price can be best defined by the optimal housing price. Based on a model of the maximal utility of a rational consumer, this study takes several important parameters that affect the optimal housing price of a rational buyer, quantifies the parameters, and simulates the model with relative values. The results of the model indicate the positive impact in terms of the real growth rate of housing prices, the housing consumption preference, the real rate of return, and the risk aversion coefficient on the optimal housing price. Thus, the loan value ratio (LTV) and the bequest motives all show negative impact. However, the impacts of mortgage rates at lower rates are negative, while those at higher interest rates are positive. The opt
ISSN:1018-161X
1810-4851