Strategic sequencing behavior among owner-occupiers: The role played by sell-first movers in a housing recovery

This article aims to study the dual search problem using data on the Norwegian housing market during the financial crisis of 2008 and begin the detailed mapping of the elements in the transmission mechanism from policy to the housing market. Moving owner occupiers face a simultaneous dual search and matching problem, as they must locate both a buyer and a seller with whom to transact. Individual agents solve this optimization under uncertainty by planning to make their bids for a new house partially conditional upon the sale of the old house.

Norway may function as a window into a policy quasi-laboratory since the housing market was turned around in December 2008 in the midst of a worldwide financial crisis and after a year and a half of price decreases. The article proposes that one key dimension in the recovery was the reduced frequency of households with conditional demand involving sell-first strategies and acquires data to shed light on this proposition.

Empirical evidence on the sell-first–buy-first differential, for-sale stock and stock-to-volume supports this proposition, and results indicate that the housing market is affected by sell-first strategies. The article discusses policy alternatives.

The article introduces a miniature model of housing trade sequences and a simple apparatus with which to analyze the consequences of sell-first behavior. It also acquires and combines new data on sell-first–buy-first differential, for-sale stock and stock-to-volume ratio. The article analyzes the co-movement between these time series and the house price index.