A typology of Housing Search Behaviour in the Owner-Occupier Sector


Table 3.1 Decision to form a household, adapted from Ferrari et al (2010b)



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Table 3.1 Decision to form a household, adapted from Ferrari et al (2010b)


Neoclassical Economics Approach

New households form when financial calculation of utility of living with parents or in multiple occupation is exceeded by move to new household.

Marxist Economic Approaches

A socially and historically embedded decision. Framed or determined by identification with class norms. Means of enhancing capital.

Austrian Economic Approaches

Individual is primary. Forms a household when costs of doing so are outweighed by the satisfaction gained of doing so.

Institutional Economic Approaches

Legal and social norms determine possible household formation times. Inertia and routine inhibit extensive changes to household formation.

New’ Behavioural Economic Approach

Based on calculation of benefits and costs; incentive structure influenced by potential conflict between emotions and cognition.

Old’ Behavioural Economics Approach

Shaped by cultural norms; social status; emotions. Satisficing.

The various schools have very different perspectives about the decision to form a household. An OBE approach suggests that in voluntary cases of new household formation the decision is likely to be a satisficing rather than utility maximising decision. The limited experience of living as a new household is likely to cause difficulties for the individuals involved in forecasting their experience and utility in the new household, but is also likely to reflect a movement from an existing situation which is less satisfactory than the perceived future in the newly formed household. The AE and NCE schools are more confident that the decision can be made as a rational calculation, although made under conditions of uncertainty.

“Although much of the literature actually assumes households have already formed as discrete prior step, there has been some attempt to model this decision using mainstream theories and techniques. The work of Haurin et al (1993) is instructive. They suggest that households will compare financial benefits of remaining with parents with those associated with independent living. The key drivers of the decision to form independent or multiple occupant households are expectations of wages and housing costs. In contrast, the behavioural models used by demographers to explore household formation and dissolution decision would place greater emphasis on the importance of cultural norms and social status (Burch, 1995).” (Ferrari et al., 2011, P.22)

Extensions of the NCE approach have been developed and are regularly used to explore the relationship between property process and household formation amongst younger people leaving the parental dwelling (Ermisch and Di Salvo, 1997; Ermisch, 1999), but is less frequently used to explore separation or divorce.

Household formation has played a role in many housing studies, yet the form of the household had been a relatively minor issue in attempts to understand the actual decision-making process. The household form presents a complex problem for analytical purposes, as there are questions over who or what the analytical focus should be: the individual, the head of household, the whole household, etc? Homo economicus is self evidently an individual, yet it is possible that decisions about location, tenure type and search processes are determined jointly within households. Understanding the household as an institution may provide greater insight. Levy and Lee (2004) summarise four characteristics of families, which may influence the decision process; the family life cycle, social class (family income), culture and sex-role orientation. Previous studies have also emphasised that within the process gender roles may exert influence at different points in the process and with different emphases (Davis and Rigaux, 1974), although Engel et al (1986) suggest that the gender roles are blurring. Within gender roles cultural influence may also affect the public and private roles, Levy and Lee (2004) suggest that Asian ethnicity families in particular reveal a public front of male dominance in the decision process, yet women exert a great influence privately.

Levy and Lee (2004) also consider the role of children exerting a direct or indirect influence over the process and suggest that the age of children will influence the decision, but not simply with a straightforward positive correlation. The importance here is not that gender or children per se influence, rather they serve to illustrate that household consumer decisions are collective decisions, and that the collective nature may vary from household to household. Levy and Lee’s review of literature reveals five distinct strategies that may be used to influence at points within the decision. Previous experience or knowledge places the holder in a better position to exert influence. Legitimacy of knowledge may be context dependent, for example where the mother is primary child carer, her knowledge is legitimised in understanding the needs of the family. Coalition occurs between groups to strengthen a particular preference. Emotional appeals rather than reason are used to add weight to the argument for or against a decision (Levy et al., 2008). Bargaining is the first strategy, where issues are traded to reach a perceived mutually optimal outcome. The ability of households to understand who exerted what influence and how decisions have been made in the past is itself questionable, yet highlights the complexity of joint decision-making (Park, 1982). The communal decision is further extenuated by relations with the wider society, partially dependent upon the institutional context of housing sales, such as the role of estate agents or the role of extended families and friendships, confirming housing choice as a social rather than discrete and isolated decision (Levy et al., 2008, Smith et al., 2006). Emphasising the communal nature of decisions, whether in a firm or household, is a direct contradiction of the NCE tradition of assuming that the individual is the decision maker (Munro, 1995).

As intimated above, the decision to form a household is often not included in housing analysis; part of the reason for this is the complexity in determining the analytical unit. Whilst the whole household may be an analytically defensible unit for analysing the final choice of dwelling, it is less clear what the unit should be in analysing the decision to form a household. In some cases, forced exit from the previous household may necessitate a move which was not desired by the new household unit, for example children leaving the parental dwelling or relationship breakdown between couples.

3.3.2 Decision to move


The decision to move is often related to the decision to form a new household, or the life cycle stage that a household is in (Coolen et al., 2011). However, whilst this could appear to be deterministic, these moves are often considered to be voluntary by the household involved.

“Typically, then, most moves are undertaken voluntarily and are motivated by the changes in family size which rendered the old dwelling’s space inadequate to requirements. The decision to move out is primarily a function of the changes in family composition which occur as a family goes through its life cycle.” (Rossi, 1980 P.223)

The decision to move in NCE is constantly revised by the household, so that the current dwelling is the current optimum that could be achieved by the household (cost of moving taken into account). If the household does not think that their current dwelling is their optimum they will make the decision to move.

“people are more or less constantly evaluating their housing situation and location of residence and, on the basis of this evaluation, decide whether a move is necessary. That concept of rationality leads to approaches assuming continuous-time housing choice.” (Mulder, 1996, p.211)

Migration patterns have been related to the differential between income, minus living costs, across locations, when the transaction costs of moving have been factored in (Clark, 1983). From a NCE perspective households should move to maximise real income and satisfaction at global then local scales. However, the OBE critique of this ultra-rational behaviour, combined with IE limitations suggests an alternative explanation (Cadwallader, 1992). From an OBE perspective information may be scarce and households are unlikely to know the whole range of labour and dwelling options in order to be able to compute comparable utilities. Instead they are more likely to have partial information, stylised expectations and satisfice (Ferrari et al., 2010). Mulder (1996) continues:

“Alternatively, the concept of rationality may be used in the sense of satisficing behaviour, or bounded rationality. In this view people are not assumed to be constantly maximising their utility. [...]search and moving, and even a constant evaluation of one’s housing situation, are major efforts. An obvious procedural shortcut, therefore, is not to consider moving unless there is an important reason to do so.” (Mulder, 1996, p.211)


Table 3.2: Decision to move, adapted from Ferrari et al. (2010b)


Neoclassical Economics

Compare relative expected income at origin and possible destination after moving costs; evaluation process ongoing; multiple moves to maximise utility.

Marxist Economic Approaches

Historically and socially contingent. Selfish and rational capital accumulation.

Austrian Economic Approaches

No macro trend discernible. Individuals move when subjective interpretation of utility and price signals (plus opportunity costs) suggests greater individual satisfaction in move.

Institutional Economic Approaches

Perceptions of transaction costs and the norms of life stages for moves will determine the decision. Current situation reflects constraints on decision to move as well as utility maximisation

New’ Behavioural Economic

Calculation of expected net benefits, but recognition of bounded rationality and incentive structure influenced by potential conflict between emotions and cognition.

Old’ Behavioural Economics

Initiated by stressors / triggers mainly surprises or life cycle stage; vague awareness of options and relative wages; limited scope for re-adjustment if move sub-optimal

The incentive to move is likely to only induce a move if it is greater than the incentive to remain in the current dwelling, whether that is because of proximity to services or family, property characteristics, or identification with the dwelling. For this reason, Hickman et al. (2007) suggest that the push to move is likely to be a combination of factors rather than one ‘rational economic’ motivation. It is possible to understand the decision not to consider moving perpetually as a decision to satisfice, in that the current dwelling is seen as ‘good enough’ for the household, until a lifecycle change or other influence alters the household preferences, opportunities or property characteristics.

The decision to form a new household or to move dwelling has traditionally been seen as either a forced decision i.e. there is a ‘trigger’ or ‘push-pull’ emphasis for example dilapidated housing conditions or a change in family circumstances, or an adjustment move to improve housing circumstances (Clark and Onaka, 1983), yet recent research has questioned this assumption and argued for a more nuanced view of the reason for household moves. Hickman et al. (2007) suggest that new formation is a result of a complex interaction between four key variables: resources; identity and dispositions; residential perceptions and interpretations and notions of place. This suggest that the decision to form a new household is a culturally conditioned decision and reflects both wider social trends and individual perceptions of those trends and personal identities.


3.3.3 Specific attributes and dwelling search

Table 3.3: Selection of a dwelling, adapted from Ferrari et al. (2010b)


Neoclassical Economics

Maximise utility function that incorporates implicit value of dwelling attributes. Direct comparison of benefits of each possible attribute.

Marxist Economic Approaches

Reflective of historical and cultural class values. Rational pursuit of class identifying attributes.

Austrian Economic Approaches

Personal decision based on subjective values and individual order of preferences for needs and wants. Transaction process is key, prices reflect specific negotiations not market trends.

Institutional Economic Approaches

Perspectives shaped by availability and cultural norms (variants of exogenous determination). Transaction costs preclude consideration of all attribute / dwelling possibilities.

New’ Behavioural Economic

Subjective, and bounded rational, assessment of benefits potentially subject to trade-offs with emotions.

Old’ Behavioural Economics

Attributes of varying importance; some features harder to evaluate than others; cognitive limits significant; emotional responses

A household’s search for a dwelling is rarely a search for shelter alone. It is a search for characteristics, or attributes of a dwelling. These attributes may be the size, style or particular features of a property (or location, see below). A household may not have a fixed notion (preference) of every attribute of a dwelling, but they are likely to have a good idea of some of the attributes that they value.

“Only a very small proportion of families stated that they would take any dwelling offered to them. Most families were looking for particular kinds of places. Practically every family was looking for a new place of a particular size or design. Some families were searching only in particular sections or neighbourhoods within the city. Others wanted homes near their relatives or friends or which had congenial – to them- social composition. The modal family in its search for a new home was looking for a dwelling of a particular size and having certain essential design features.” (Rossi, 1980, P.223-224)

Neoclassical economists make extensive use of hedonic analysis to reveal the price of each major housing characteristic that makes up overall property prices (Witte et al., 1979; Keskin, 2008). These analyses assume that homo economicus can compare the details of properties to determine the value of an added bathroom or even the decorations. Both BE views consider mankind’s ability to compute this with less certainty and therefore draw on Simon’s (1978) ideas of bounded rationality. The emotional state of household’s prior to and as they view a property may influence their response to the property and may therefore be reflected in the decision to place an offer, or the level of offer. Institutional Economics analysis, such as Veblen’s (1899) idea of conspicuous consumption may also influence a household’s decisions about the required attributes. Institutional factors do not necessarily remain constant across time and space, and therefore across submarkets. Within submarkets therefore groups with varied influences may value characteristics differently. Wiest (2011) found that when comparing similar property characteristics across a range of ex-Soviet countries housing markets were influenced by both globalising trends and very local factors as well as social trends, suggesting that institutional trends are operating at local, national and international levels.

“While housing preferences may appear to be the result of transnational influences and the transmission of cultural patterns in globalizing urban societies, the social composition and residential mobility of the housing estates studied here are influenced by the local housing market, the social structure of urban societies and local peculiarities.” (Wiest, 2011, P.428)

The variation in international and local institutional trends that impact the popularity of housing characteristics may impact differently on long distance and short distance movers as they have different cultural references and norms about what property characteristics signify in society.



3.3.4 Housing location search

The search for a dwelling is a spatial search, and involves sifting of locations (McPeake, 1998). A household’s location preference is a spatial manifestation of multi-layered spatial attributes, and is likely to lead to differences in the extent of search between households (Maclennan, 1992). Kauko (2006) identified seven spatial attributes that are likely to impinge on households’ preferences for locations (and therefore the value that households place on the location in the overall price paid): accessibility and proximity (e.g. distance to work or services); neighbourhood social factors (e.g. social/class signifiers); service infrastructure (e.g. hospitals, schools); physical environment (e.g. density, green space); presence of water (net effect of water as amenity and risk); municipality (e.g. political image or local government policy); and supply-side friction (e.g. lack of substitutable dwellings). Whilst each of these seven characteristics contains multiple concepts, the lightning fast calculator of NCE is required to determine their value for each overlapping layer, though they may be operating at different spatial scales (although households may not value each characteristic, so may not be concerned with every layer). Structuralist approaches to analysing housing markets argue that social trends in the perceptions of locations and neighbourhoods will influence preferences. Rational structuralist models assume that households will maximise utility within these trends, whilst behavioural structuralist models assume that households will have impressionistic views at best, and will take short cuts in their information gathering and deliberation (therefore prices will reflect impressions rather than precise values).

There has been a critique of the NCE position on the behaviour of consumers in relation to housing location search since the 1970’s. Ferrari et al (2010b) cite Grigsby’s (1978) work as critical in rebuffing the concept of an access space trade off, which suggests that demand is determined by a calculation of the distances from important places, such as the shopping district and central business district (see Muth, 1969 or Gibb, 2003). The complexity of some models is such that they can incorporate a large number of subsidiary locations, yet the concept underpinning this is that people rationally determine housing location by considering the cost of travel (most often to a place of work).

Wolpert (1965) expanding on the notion of bounded rationality and Simon’s idea of action-space suggests that housing search is likely to include a sample bias. When considering housing households are most likely to consider properties in their immediate environment, to produce a spatially biased set of information (Silk, 1971; Barrett, 1976). Behavioural geography has explored the possibility of understanding search patterns based on questioning searchers perceptions of mental maps and mental schemata (e.g. Adams, 1969). Although progress in this area has proved difficult, there have been some useful insights. Aitken (1987), for example, found that location search patterns were predicated on the expectation of housing opportunities in those locations, therefore outcomes were partially contingent on perceptions of the housing market prior to searching. Whilst this decision to focus on the immediate can be understood in terms of transaction costs, there is no guarantee that limiting transaction costs produces a more economically rational outcome:

“In the absence of a homogeneous surface, however, the difference in cost may be more than outweighed by the loss in representativeness of a given cluster.” (Wolpert, 1965, P. 164)

The extent of this bias may be limited to greater or lesser extents, the range of contacts and search effort to consider other locations will shift the bias, but it is likely that even with extensive effort some bias will remain due to the nature of information availability (Brown and Moore, 1970).

Analysis of different housing markets in Finland has shown that the qualities of a preferential location and neighbourhood are variable between markets (Kauko, 2006b). In more recent work, with low-income inner-city African American families, Wood (2014) found that interviewees sought to maximise the physical characteristics of the property as their priority and were more willing to satisfice on location as a secondary order issue. Whilst this study focuses on just one group of people, it is possible to see both a social trend amongst this group, and to imagine other groups with different priorities (for example middle class families in urban England seeking locations as the priority and willing to satisfice on physical characteristics in order to be located near to ‘good’ schools).

Table 3.4: Housing location search, adapted from Ferrari et al (2010b)


Neoclassical Economics

Trade-off access and space. Knowledge of all neighbourhood possibilities.

Marxist Economic Approaches

Reflective of historical and cultural class values. Rational pursuit of class identifying neighbourhood.

Austrian Economic Approaches

Personal decision. Movement between locations reflect partial knowledge of price differences and marginal utility of needs and wants.

Institutional Economic Approaches

Social structures and localised norms (contingent on power) hinder or encourage viewing and perceptions of neighbourhoods. Rational action in relation to these structures.

New’ Behavioural Economic

Potentially inaccurate assessments of costs and benefits of access-space trade-offs; utility derived from social ties/spatial capital and bonds (emotions).

Old’ Behavioural Economics

Complex and emotional interactions between household members; Neighbourhood attachment; Social ties; Attitudes towards and perceptions of quality matter

Whilst both NBE and OBE suggest that there are computational limitations in the ability of consumers to act in line with the access space trade off, OBE distances itself further from the NCE position. Social bonds within neighbourhoods limit the extent to which people are prepared to relocate to different locations, which are more ‘optimal’ (Watkins, 2008).

There is scope for further research into the intra-household relations in relation to location preferences, particularly in relation to the engagement with the local environment by different types of household, for example with children or without.

3.3.5 Housing Search Strategy

Household’s move home only infrequently, and therefore are unlikely to have up to date information about the market (Watkins, 2009). In order to bridge the information deficit, households must select mediums to obtain further information about the housing market and opportunities that might meet their aspirations within the households’ constraints. The importance of different information sources varies from study to study, suggesting variation in importance across time and space, yet remains poorly understood (McPeake, 1998). The selection of information sources, intensity of search and the length of search all require some level of decision by the household, and results in significant multidimensional variation between households (Clark and Smith, 1982). Whilst NCE models suggest that full information is available to the mover at the start of the search process, most NCE researchers recognise that this is an unrealistic assumption. The searcher, however, is able to optimise the information sources, duration of search and intensity and will stop at the optimal point where no further search could provide greater utility.




Table 3.5: Search strategy, adapted from Ferrari et al (2010b)


Neoclassical Economics Approach

Optimise duration and intensity; stopping when expected utility of future search is less than costs. Information and search are subsumed as transaction costs and do not influence behaviour.

Marxist Economic Approaches

Search processes are outworkings of social trends and segmentation. Class based ability to access technological and expertise facilitate advantageous search experiences. Rational within all classes.

Austrian Economic Approaches

Information is partial and hard to obtain. Search is personal. Opportunity cost of search is personal.

Institutional Economic Approaches

Shaped by cultural norms and power structures (including estate agents). May be rational, when viewed by cultural constraints.

New’ Behavioural Economic Approach

Profound information problems suggest sub-optimal strategy and calculations of net benefits

Old’ Behavioural Economics Approach

Emotionally shaped; trust and reliance on agents as legitimate ‘short cut’; Highly impressionistic due to knowledge characteristics and uncertainty

The extent of search needed is unknown at the beginning of the search process, yet the cost of searching for the perfect dwelling is likely to be prohibitively high causing households to limit their search pattern and settle at an acceptable standard of characteristics (Anglin, 2003).

Rossi (1980) found that half of all households undertaking a search for a dwelling (including rental accommodation) selected the first dwelling they considered in detail. This might suggest a very limited search stage and that the transaction costs (including emotional and opportunity costs of search) play a role, or that households may be satisficing rather than utility maximising.

“Half of the families made their choice of a new home after looking at only one possibility. They found this single opportunity close enough to their desires to take it without looking further. The other half of the families studied made their choices from among several alternative possibilities.” (Rossi, 1980, P. 224)

Both NBE and OBE perspectives argue that the NCE view of the search strategy fails to consider again the inability of humans to gather and process enough information to make a decision about the optimal duration of a search and to know when exactly the search costs have overtaken the utility of the future dwelling (Ferrari et al., 2010b). In NCE, the dwelling purchaser needs to be able to understand price and transaction volume trends in the housing market in order to be able to create a rational search strategy.

“How housing consumers respond to house price movements varies (Kiel, 1994): some intensify search in the face of house prices increases and others reduce the intensity of search or postpone search altogether. A key question for our purposes is, if we reject standard assumptions that housing consumers can form rational expectations, because they are unsupported by the evidence (e.g. DiPasquale and Wheaton 1994, Muellbauer and Murphy 1997, Poterba 1991), how do consumers form expectations regarding the future path of house prices upon which they base their strategy?” (Marsh and Gibb, 2011, P.221)

From an OBE perspective determining the extent and intensity of the search strategy will be partially dependent upon the attempts others make to influence the process. Estate agents may play a pivotal role not only in guiding negotiations when a dwelling has been determined (Smith et al, 2006), but also in encouraging or discouraging an extensive search, or to satisfice early (Smith and Mertz, 1980). Indeed estate agents may influence households to search in different ways, in part depending on the household characteristics (Teixeira, 1995; Galster, 1992). Perceptions of changes in market conditions will also influence both estate agents and household decisions about the urgency of finding a property. OBE analysis should consider further the social influences upon determining a search strategy.

Ferrari et al. (2010) expand on how IE and OBE can be brought together, expanding on Maclennans approach, to a fuller understanding of housing search strategies.

“Maclennan (1982) offers the prospect of an institutionally oriented behavioural approach (akin to the Original Behavioural Economics) to exploring the search process. This encapsulates three distinct phases: (i) an emotional and social stage, where experiential knowledge, and hence norms and habits are prominent and where the paths or future evaluatory processes are shaped and aspirations are formed on the basis of highly impressionistic and subjectively interpreted generalised information from sources such as the media; (ii) considered scrutiny (a form of more ‘conscious deliberation’) during which an ordered search will take place on the basis of aspirations and perceived constraints, which may engender other emotional influences such as counterfactual emotions – disappointment – social emotions such as liking as well as experiential and social referent emotions all of which shape deliberation and, drawing from Earl (2005), begin to reconcile aspirations with more realistic, feasible options; and (iii) detailed intensive evaluation (involving, for instance, formal surveys) of specific properties within clearly established price ranges and submarkets, ending ultimately in most cases in bid formation.” (Ferrari et al., 2011, P.24-25)


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