The Demand for Owner-Occupied Housing: Implications from Intertemporal Analysis

A household's consumption of housing depends on current and expected future values of influential variables. However, the cost variable used in most studies of housing demand is static. In contrast, we formulate a cost measure that incorporates both expected future changes in its components and...

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Bibliographic Details
Published in:Journal of housing economics 1998-03, Vol.7 (1), p.49-68
Main Authors: Haurin, Donald R., Chung, Eui-Chul
Format: Article
Language:English
Subjects:
Consumption patterns
Demand
Estimation
Household consumption
Housing
Transaction costs
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Summary:A household's consumption of housing depends on current and expected future values of influential variables. However, the cost variable used in most studies of housing demand is static. In contrast, we formulate a cost measure that incorporates both expected future changes in its components and the transaction costs associated with home ownership. Measuring annualized transaction costs requires us to estimate a household's expected length of stay at the time of purchase. We use a parametric hazard rate model for this estimation. By projecting future values of the other components of user cost, we complete the measurement of a multiperiod version. Results from estimating housing demands show that our multiperiod transaction-adjusted user cost performs better than the static form and that inclusion of transaction costs is the most important adjustment.
ISSN:1051-1377
1096-0791
DOI:10.1006/jhec.1998.0224