THE DEMAND FOR OWNER-OCCUPIED HOUSING - IMPLICATIONS FROM INTERTEMPORAL ANALYSIS

A household's consumption of housing depends on current and expected f uture values of influential variables. However, the cost variable used in most studies of housing demand is static. In contrast, we formulat e a cost measure that incorporates both expected future changes in its components and the transaction costs associated with home ownership. Measuring annualized transaction costs requires us to estimate a house hold's expected length of stay at the time of purchase. We use a param etric hazard rate model for this estimation. By projecting future valu es of the other components of user cost, we complete the measurement o f a multiperiod version. Results from estimating housing demands show that our multiperiod transaction-adjusted user cost performs better th an the static form and that inclusion of transaction costs is the most important adjustment. (C) 1998 Academic Press.