|
Quality Decisions: A Stochastic Equilibrium Model of Homeownership Author: Sharon I. O'Donnell Dissertation School: University of Houston Pages: 75 Publication Date: May 2002 Availability: Access Number: 10801 Abstract: Long-term observers of urban communities know that the distribution of housing quality and the changes of this distribution over time encompass not one but a variety of neighborhood housing patterns. Results from the housing market literature, most notably the filtering literature, explain one pattern of change. Using Rust's (1985) stochastic equilibrium model of durable goods, we determine that the market can generate a set of patterns depending upon the degree of heterogeneity of homeowners, the underlying technology of the structures, and the set of housing quality that makes up new construction. The paper presents a stochastic, dynamic programming model of homeowner choice, given a market with new and existing structures of varying quality and a renewal process that describes the deterioration and replacement of these structures. Homeowners differ by taste. Given the developer's competitive prices for new construction, the scrap prices for low quality structures, and optimizing behavior of homeowner types in the market, heterogeneous homeowners sort along a holding distribution of homes. The heterogeneous population leads to variations in 1) demand for new construction, 2) tenure choice, and 3) optimal holding times for homes. The model determines the state of quality that is the lowest quality demanded by homeowners. Determining this boundary and how it can vary has significant implications for policy. |
|
|
Last updated: Wednesday, March 06, 2013 HUD USER Helpdesk P.O. Box 23268 Washington, DC 20026-3268 Toll Free: 1-800-245-2691 Fax: 1-202-708-9981 Email: oup@oup.org |
 |
Privacy Statement |
     |
