Microeconomic Perspectives on the Structure and Operation of Local Housing Markets

Abstract

This paper provides a highly selective review of the voluminous literature on the economic analysis of local housing markets. It is suggested that, although it often appears that mainstream economics is more concerned with improving technical elements of the modelling approach than enhancing our understanding of how markets function, there is in fact a rich literature that is largely concerned with explaining market processes and dynamics and with the impact of policy interventions on the workings of the market. The housing economics literature is more methodologically diverse than many housing analysts might expect and, in the UK and Europe in particular, this has helped stimulate several new developments in local market analysis. These advancements have been associated, in part, with improvements in statistical techniques and conceptual models. This has resulted in renewed interest in the treatment of neighbourhood segmentation and complex spatial processes in local market analysis. It is argued that further progress might be made by abducting insights from qualitative analysis in order to improve the specification of models and in their refinement and development.