Moving and Improving: Strategies for Attaining Housing Equilibrium

The concept of equilibrium consumption is central to much housing market analysis, yet analysts must contend with the likelihood that many housing consumers are not at an exact equilibrium level of consumption because of the inhibiting effects of the high cost of moving. This paper explores the theoretical and empirical importance of improvement activity and its relationship with residential mobility in attaining equilibrium housing consumption. The paper argues that previous frameworks have over-simplified the options available to households, by assuming that improving and moving are discrete, alternative ways of attaining an equilibrium level of consumption. Instead, the evidence presented here suggests that recent movers will frequently undertake a programme of improvement activity so that the newly acquired dwelling will, over a period of months or years, more closely match the household's requirements. This suggests that the price and quality 'bundle' chosen at the time of purchase may not, in fact, be an accurate measure of the households current or future equilibrium housing consumption.