Effect of equity constraints on housing prices in rising markets

The purpose of this paper is to describe how equity constraints influence housing prices in rising markets through theoretical analysis and simulation.Existing models are modified by adding a coefficient for the household mobility blocking to simulate the demand with changing market prices.The result shows that increasing prices have little effect on demand for down payments proportions of 0.3,but have great effect on demand when the down payment proportion drops to 0.1.Less non-performing loans lead to more demand released by rising prices.Thus,when suffering from the blocking effect,equity constrained sellers list and finally receive a higher price in rising markets,resulting in the sale prices of completed deals increasing more quickly.Subsequent entrants then set higher listing prices for the purpose of increasing house size,which results in self-reinforcing price rises.