Disequilibrium in Housing Models

The housing and mortgage markets have long been considered to be markets that may not always be in equilibrium, and many econometric models of the housing and mortgage markets have tried in one way or another to account for disequilibrium effects. In this paper a critique of previous models of the housing and mortgage markets is made. The main argument of the paper is that disequilibrium effects have not been accounted for in an adequate way in most models. A related argument of the paper is that many models have not captured in an adequate way the interaction between the housing and mortgage markets. In Section II a general model of the housing and mortgage markets, based on the model in [ 5, Chapter 81, is outlined, and then in Section III previous models of the housing and mortgage markets are amdyzed within the framework of the model outlined in Section II. Section IV concludes with suggestions for future research. It should be noted that while representative models were chosen for review in Section III, the list of models reviewed is by no means exhaustive. Tbii paper is not meant to be a survey of the literature on housing and mortgage models, but is merely meant to be a critique of models with respect to the specification of disequilibrium effects and with respect to the specification of the interaction between the housing and mortgage markets.l Also, the critical tone of the paper regarding these two issues should not be interpreted as a degradation of the significant progress that has been made in the past two decades in understanding the workings of the housing and mortgage markets.