Transaction Sequencing and House Price Pressures

We use a unique data set of individual housing transaction histories from Norway and a novel shift-share design to show that temporary changes in the transaction sequencing decisions of moving homeowners—whether to buy first and then sell or vice versa—cause temporary local increases in house prices and seller liquidity. Our findings are consistent with a simple theory of how transaction sequencing decisions impact house prices in a frictional housing market. We also provide the first causal estimate of the elasticity of house prices to market tightness, which is around 0.1. Overall, our findings highlight the importance of trading frictions and supply-demand imbalances for housing market dynamics. This paper was accepted by Bo Becker, finance. Funding: This work was supported by Norges Forskningsråd [Grant 274678: Frictions in the Housing Market]. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2024.08149 .