Essays in housing markets: Housing prices and household behavior

This dissertation consists of two essays on how changes in the economic environment affect housing prices and household behavior. The first essay studies the effects of large fluctuations in housing prices and stock prices on the homeownership rate and household portfolio allocation in Japan during the period from the late 1980s to the early 2000s. To investigate the effects, a life-cycle model is constructed where asset prices are taken to be exogenous and the expectation on housing prices is explicitly modeled. I find two results. First, the changes in the homeownership rate are well-explained by the changes in housing prices and expectations, while the changes in stock prices have little affect on the homeownership rate. In particular, the difference between the homeownership rate changes among the young households and the old households is explained by the existence of the downpayment requirements. Second, the difference in changes in the share of wealth invested in financial assets by the young and the old is also largely explained by the changes in housing prices and expectations.;The second essay explores the effects of changes in the economic environment on housing prices and the homeownership rate through a comparative study of the housing markets in Japan and the U.S. To investigate this issue, a general equilibrium overlapping generation model is constructed where housing prices and rents are determined endogenously. I find three results. First, the model shows that the decrease in the interest rates and the increase in the TFP growth rate account for most of the increase in housing prices and the housing price-to-rent ratio during the late '80s in Japan and during the 2000s in the U.S. Second, the model predicts the subsequent decrease in housing prices and the housing price-to-rent ratio in the '90s in Japan. Third, I find that while the change in downpayment requirements had little effect on housing prices and the housing price-to-rent ratio, it accounts for the difference in the change in homeownership rate between Japan and the U.S.