House Search Duration in Hot and Cold Residential Markets

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Abstract

This study analyzes the determinants of house search duration of consumption-driven buyers and individual investors in different housing market environments. We use data from surveys of recent house-buyers in “hot” and “cold” housing markets in the 2000s housing bubble in California characterized by rising and declining residential house prices, respectively. The average house price and the surveyed geographical area are the same for both periods. Expected house ownership horizon is shown to be an important determinant of the realized search duration in addition to commonly considered housing and buyer characteristics. We find a statistically significant positive effect of it on the time until purchase in both housing price environments for consumption-driven buyers. We also find that consumption-driven house purchases were highly pronounced in coastal areas in the hot market and inland areas in the cold market. In contrast, long-horizon investment activity leads that of consumption activity in those areas. Short-horizon investors, on the other hand, concentrated their house search activity in inland areas in both housing market environments.

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