Díaz, AntoniaJerez, BelénRincón Zapatero, Juan P.2023-06-162023-06-162022-112341-2356https://hdl.handle.net/20.500.14352/4335∗This paper was previously circulated under the title “Wealth Effects with Search Frictions in Housing Markets". We are grateful to participants at the REDg Workshop, the Marrakech Macro Workshop, the Search and Matching workshop at Bristol University and the SAET Conference, and in seminars at Universidad de Alicante, Universidad de Salamanca, Universidad Carlos III de Madrid, Konstanz University, University of Edinburgh, and Baruch College for their comments and suggestions. Support from the Spanish Ministerio Economía y Competitividad, grants ECO2016-76818-C3-1-P, ECO2017-86261-P, PID2019-107161GB-C31, MDM 2014-0431, and Comunidad de Madrid (Spain), grant EPUC3M11 (V PRICIT), are gratefully acknowledged. A. Díaz thanks the European University Institute for its hospitality and the Fernand Braudel Senior Fellowships programme for its support while working on this project. †Corresponding Author: Antonia Díaz, ICAE (Complutense Institute of Economic Analysis), Universidad Complutense de Madrid, 28223 - Pozuelo de Alarcón (Madrid), Spain; E-mail: antonia.diaz@ucm.esThis paper shows that, when utility is imperfectly transferable and the search process is competitive (or directed), wealthier buyers pay higher prices to speed up transactions. This result is established in a dynamic model of the housing market where households save both to smooth consumption and to build a down payment. “Block recursivity” is ensured by the existence of risk-neutral housing intermediaries. The calibrated version of our benchmark economy features greater indebtedness and higher housing prices in the long run compared to a Walrasian model, especially when the elasticity of new housing supply is low. We also show that the long-run effect of greater credit availability on housing prices depends crucially on whether or not rental and real estate housing stocks are segmented. Under full segmentation, price effects are much larger, with and without search frictions. But, even if there is no segmentation, these effects are substantial in our search model when supply elasticity is low, being larger than in the Walrasian version of the model. The last result is reversed with full segmentation, when search frictions dampen the price effect of the credit expansion.engtechnical reporthttps://www.ucm.es/icae/working-papersopen accessD31D83E21R21R30Competitive searchWealth effectsHousing pricesCredit constraintsHousing supply elasticityRental market.Econometría (Economía)5302 Econometría