Market Clearing in Housing
https://www.princeton.edu/~wxiong/papers/Housing.pdf
A study I found interesting, was conducted at Princeton to connect the choice of neighborhood house prices to the commercial, economic, and overall welfare of the community members. The noise emitted from the community’s housing prices can limit or drive the local economy and potentially control the commercial development in the area. A popular concern for new home buyers is the price of the neighborhood they are thinking about living in. Higher demand for the house is usually associated with a lower price and a multitude of quality assets that surround the neighborhood. One aspect of this study looks into how current members of the community determine the future valuations of buyers, as well as, the specific homeowners they want to attract. Creating larger houses with more refined styles might attract people with bigger families, while a neighborhood that invests in community programs and commercial real estate might attract families that are more active and involved with the local area. All of these changes contribute different magnitudes of value changes in a home buyer’s valuations and community members consciously devote time to implementing these changes as a way to create their image of an optimal community at large.
This report relates to the strategy of market clearing in order for sellers to find a “perfect match”. This is a person who a neighborhood can see adding to the existing structure of the neighborhood instead of changing the cultural dynamic within the area. The first barrier is price, which sets up a certain income range for the buyer to fall into. The second barrier is the culture of the neighborhood, if someone doesn’t have some, or all, of the same ideals as the rest of the neighborhood it can be hard for the buyer to see the area as a comfortable place to live and start a family. A lot of neighborhoods are structured in this way and continue to become more divided because of it. Market clearing does a great deal of work in the economic market but it does just as much in the social market too.