Working Paper
Spatial distribution of housing liquidity
This paper examines the relationship between location, liquidity, and prices in housing markets. We construct spatial datasets for German and U.S. cities and show that liquidity and prices decline with distance to the city center. To rationalize these results, we build and estimate a spatial housing search model. Our model demonstrates that travel costs determine the spatial distribution of liquidity and prices. In a counterfactual analysis, we suppress search frictions and find that frictional illiquidity reduces prices and welfare, particularly in the outskirts. Our findings underpin the importance of demand-side preferences for asset pricing.
Key Words
- housing liquidity
- housing prices
- cities
- spatial equilibrium
- housing demand
- asset pricing