Simulating transaction networks in housing markets

Abstract

Linked networks of transactors attempting to complete both the buying and selling of properties, often termed "housing chains", are conspicuous features within owner-occupied housing markets, often seen as a cause of severe delay to transaction completion. This paper introduces a bounded or limited rationality-based model of housing market transactions and examines the properties and predictions of the resultant system. Agent-based simulation is able to reproduce: a) the existence of chains of buyers and sellers observed in the housing market; b) the delays to transaction completion often noted; and c) the empirical observation that housing price series for first-time buyers and for new or vacant housing serially leads the series for existing, current owner-occupiers.