This paper uses an assignment model to understand the cross section of house prices within a metro area. Movers’ demand for housing is derived from a life-cycle problem with credit market frictions. Equilibrium house prices adjust to assign houses that differ by quality to movers who differ by age, income, and wealth. To quantify the model, we measure distributions of house prices, house qualities, and mover characteristics from micro-data on San Diego County during the 2000s boom. The main result is that cheaper credit for poor households was a major driver of prices, especially at the low end of the market.

This paper studies housing markets where a subset of houses in a restricted area is available exclusively to a subset of “eligible” buyers. An empirical part shows that houses on Stanford campus (available only to faculty) trade at substantial discounts to comparable houses off campus. The theoretical part describes an assignment model with heterogeneous houses and buyers which predicts such discounts if the matchup of quality and buyer pools is sufficiently different inside versus outside the restricted area. The restriction can distort allocations by making eligible buyers choose either higher or lower qualities than ineligible buyers with the same characteristics.