Abstract
Recent research has recognized that the market for owner-occupied housing is often inefficient and adjusts slowly to changes in market conditions. This paper develops a disequilibrium housing-market model that separates disequilibrium generated by supply-side disturbances from those arising from demand disturbances. I apply the model to the US housing market for the period 1967–1998. Although price changes guide the market toward a new equilibrium, inefficiencies impede market clearing. Thus, the market is characterized by sustained periods of disequilibrium.
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