Cecilia Garcia-Peñalosa: cecilia.garcia-penalosa[at]univ-amu.fr
Housing transactions by moving owner-occupiers take two steps, purchase of a new property and sale of the old housing unit. This paper shows how the transaction sequence decision of moving homeowners depends on, and in turn, a effects housing market conditions in an equilibrium search model of the housing market. We show that moving homeowners prefer to buy first whenever there are more buyers than sellers in the market. This behavior leads to multiple steady state equilibria and to self-fulfilling fluctuations in prices and time-on-market. Equilibrium switches create large fluctuations in the housing market, which are broadly consistent with stylized facts on the housing cycle.