Moving Costs and the Dynamics of Housing Demand

Abstract

It is well established that moving costs make households adjust their housing consumption far less frequently than they would have done in a world in which relocation was costless. This paper adds to our understanding of the dynamics of housing demand by constructing a life-cycle model of housing demand on which several numerical experiments are performed. Among other things, it is shown how the sign of price elasticities may be indeterminate because of changes in moving careers induced by price changes. The paper also demonstrates that planned (endogenous) moving activity and stochastic forced moves should be analysed within a common analytical framework. One simple version of such a common analytical framework is presented and discussed.