An Econometric Model of the Israeli Housing Market

02/04/1995 |  Bar-Nathan Moshe, Beenstock Michael, Haitovsky Yoel

Abstract

In this paper we report our efforts to estimate an econometric model of the Israeli housing market estimated from

quarterly data over the period 1974-90. The principle endogenous variables in the model are housing starts and

completions, the stock of housing, house prices and rents. The specification of the model draws on capital asset

pricing theory in which account is taken of stock-flow phenomena that are inherent in the housing market. At a given

point in time the stock of housing is fixed and house prices are treated as the price of a capital asset which clears

the asset demand for housing. At the same time house-building is motivated by profitability which reflects the level

of house prices. Increased building activity raises the stock of housing over time which, in turn, feeds back on to

house prices.


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