Abstract
This chapter describes the operation of housing markets. It presents a number of models of the housing market. It presents the model in which housing is treated as any other commodity in microeconomics. The model shows the effect of income changes on the housing market. The model can be used in a similar fashion to explore a change in any exogenous variable on the demand side or the supply side, such as to see the effect on prices and output of increases in the number of households in the market or a fall in construction labor costs. The characterization of housing market equilibrium and the use of comparative statics become much more complicated when housing is viewed as a heterogeneous commodity. Once an equilibrium solution is derived, then the method of comparative statics can be applied to see the way changes in exogenous variables influence the equilibrium configuration.
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