Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/315471.2 
Year of Publication: 
2025
Series/Report no.: 
Kiel Working Paper No. 2284
Version Description: 
This Draft: September 2025
Publisher: 
Kiel Institute for the World Economy (IfW Kiel), Kiel
Abstract: 
This paper examines the relationship between location, liquidity, and prices in housing markets. We construct spatial datasets for German and U.S. cities and show that liquidity and prices decline with distance to the city center. To rationalize these results, we build a structural model with spatial search frictions. We argue that location preferences concentrate buyers in central areas, making markets tighter, more liquid, and driving up prices. Counterfactuals show that suppressing search frictions raises welfare and prices, especially in peripheral areas. Our findings highlight the importance of demand-side preferences and search frictions for understanding liquidity and asset prices.
Subjects: 
housing liquidity
housing prices
cities
spatial equilibrium
housing demand
asset pricing
JEL: 
G12
G51
R21
R30
Document Type: 
Working Paper

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2 10419/315471.2 This Draft: September 2025
1 10419/315471 First Draft: March 2025

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