Housing Market Search Behavior and Expected Utility Theory: 2. The Process of Search

This paper presents the second part of a study of an expected utility theory of housing market search. The basic disequilibrium theory of search is recapitulated, and a direct estimate of the stress function ψⁱ_t is calculated from individual data on households during the process of search (the longitudinal sample) and households who had already bought a house (the retrospective sample). Although the tests are simple and approximate and are not without problems, we conclude that the direct test yields results which are in accordance with the theory. Additional explanatory analyses of the process of search focused on the interrelationship of household characteristics, housing attributes, search effort, and search strategy. The descriptive data on temporal and spatial search emphasize the importance of realtor involvement in search, the constraints (on search) of stage in the household life cycle, and the differences in search activities for new and ‘used’ housing.