A Basic Search and Matching Model of the Housing Market (Chapter 2)

Housing markets are “search markets” and, thus, some key insights of the search and matching model described in Chapter 1 can be used for analysing the homeownership and rental markets. Indeed, this chapter clearly shows that a basic housing market search and matching model can explain the main empirical facts of housing markets, viz.: the trade-off between housing price and time-on-the market, the positive correlation between housing price and trading volume (the number of contracts traded during a given period), and the phenomenon known as “housing price dispersion”.