Housing demand stimulus produces a multiplier effect by freeing up owners attempting to sell their current home, allowing them to reenter the market as buyers. Exploiting a shock to first-time home buyer demand caused by a cut in mortgage insurance premiums, we find that homeowners buy their next home sooner when the probability of their current home selling increases. We build and calibrate a search model that explains these findings as a result of homeowners avoiding the cost of owning two homes simultaneously. Simulations demonstrate that stimulus to home buying generates a substantial multiplier effect, particularly in cold markets.
Anenberg, Elliot, and Daniel Ringo.
"The Propagation of Demand Shocks through Housing Markets."
American Economic Journal: Macroeconomics,
Urban, Rural, Regional, Real Estate, and Transportation Economics: Housing Demand
Housing Supply and Markets
Production Analysis and Firm Location: Government Policy