Conference Paper Faculty of Economics
Family Formation and the Housing Market
21 May 2009
The aim of the paper is to study the impact of partnership instability and fertility on the housing market. While there are aggregate ‘compositional effects’ of family formation and dissolution events on the housing market, working through the number and size distribution of households, the paper focuses on the impact of such events on housing market ‘turnover’ for a given number and distribution of households. It provides a theoretical framework for analysing the housing market impacts of turnover through residential mobility. The framework is a model in which imperfect information makes it necessary for households to search for a dwelling that meets their needs. The theoretical analysis shows that higher turnover tends to increase house prices and reduce the time to sell a property. The remainder of the paper provides an empirical analysis of the impact of family formation events on residential mobility using panel data from Great Britain. It finds that partnership formation, dissolution and childbearing have substantial impacts on residential mobility, thereby promoting turnover in the housing market, with the associated impacts on the housing market identified in the theoretical section. Nevertheless, it is shown that the average residential mobility rate is only changed marginally by them, and so these events are not the major drivers of house prices and the chances of sale.