Preliminary Development of a Simultaneous Equation Model of an Urban Housing and Mortgage Market

Abstract

This paper summarizes the state of development of an aggregative simultaneous equation model of the housing and mortgage markets in New Castle County, Delaware. Unfortunately, the development has not been completed at this time. Thus we will simply report on the current status of the model. In the first section we briefly and inadequately indicate the substantial debt we owe to existing theory and previous authors for the theoretical foundations of the model. In the second section the specific approach to modeling the housing and mortage markets in New Castle County is described. Included here are the accommodations with data constraints that have been found necessary. The accounting framework for the model is also clearly specified. The third section briefly describes the results of estimating the model's equations and preliminary results of attempting to use it for simulation experiments. Theoretical Foundations : Ours is an aggregative model of housing and mortgage markets much in the tradition of Muth's work as exemplified in (15). Our focus on the mortgage market differentiates us slightly from muth as does our focus on a small geographic region. In these respects we found ourselves following closely the work of Field and Pfister (6).