CIS Transport Engineering Consulting, Santiago, Chile
February 12, 2008, 11:15, Room GC B3 424 (click here for the map)
A dynamic equilibrium model for the real estate market is presented. The model is based on the theoretic framework developed for the “Santiago Land Use Model” (MUSSA), but with some relevant differences which will be highlighted through this presentation. Households have stochastic behavior and compete for quasi-unique locations (real estate goods), which are assigned to the best bidder through an auction-type mechanism. Producers are modeled as maximizers of their profits over the long-term through the production of real estate assets, represented by the expected present value of future sales. It is assumed that the producers do not possess complete information about future levels of demand or prices; instead they take the actual and historic prices in each period as the relevant information for their decision-making. A notion of equilibrium is used that adjusts prices given two situations: supply and demand surplus. In the supply surplus case, the prices are diminished and supply in the market is reduced until it equals demand. In the case of demand surplus, the prices rise and demand diminishes (homeless households) until it equals supply. This equilibrium condition yields prices that are jumpy over time, resembling observations of inventories in the real estate market and the manufacture industry.