MOVING COSTS AND HOUSING DEMAND - ARE RECENT MOVERS REALLY IN EQUILIBRIUM

Several recent housing demand studies use samples of recent movers based on the presumption that only such households are on their demand curves. We find, contrary to this presumption, that the absolute values of the residuals from a standard housing demand equation fall with duration in the present dwelling. This shows that the correlation pattern between housing and the explanatory variables at the moving date does not correspond to the average pattern over a typical housing spell. We interpret this as evidence of forward-looking behavior and show how it may be handled in econometric work with cross-section samples. © 1991.