This paper analyzes the effects of real interest rates on homebuilders and the housing market under fixed-rate mortgages (FRM), both in long-run equilibrium and during transitional dynamics, and finds that the endogenous supply-side response to interest rate increases mitigates short-run housing price declines. I develop a heterogeneous agent model incorporating different mortgage structures, liquid assets, lumpy housing adjustment, and a construction sector with time-to-build constraints to decompose the effects of interest rates on housing prices. The findings demonstrate that in a long-run stationary equilibrium, heterogeneous household policy functions and the corresponding stationary distribution influence housing demand, while increased interest rates consistently suppress construction activity. The calibrated model demonstrates that the interest rate temporarily increases from 0.618% to 6% results in short-run housing prices that exceed those in a counterfactual without endogenous supply by 5 to 7 percentage points of the stationary price. Adjustable-rate mortgages reduce short-run housing prices by 1 percentage point of the stationary price relative to fixed-rate mortgages. The builder's financial constraint has limited impact on housing prices since a temporary increase in interest rates lowers optimal construction levels, hence a looser financial constraint.

Annuity puzzle refers to the inconsistency between theoretical results and empirical data on annuity demand. In this paper, we construct a monetary general equilibrium dynastic model with money and annuities. There are two dimensions of an asset: return and liquidity. The bequest motive is an important factor that lowers liquidity of annuity. When the liquidity of annuities is too low, it would generate a theoretical result in which the annuity accounts for almost zero percent in the retirement wealth. A higher inflation rate reduces the value of money, and a stronger bequest motive reduces the liquidity of the annuity. Consequently, a higher bequest motive and a lower inflation rate reduce the demand for the annuity, which generates the theoretical result being consistent with empirical data.

This paper analyzes effects of housing prices on non-homeowners' consumption. Using a heterogeneous-agents model, I show that low- and high-wealth households utilize unsecured debt, while middle-wealth households save against liquid assets. High-wealth households are simultaneously homeowners and mortgage borrowers. Rising housing prices generate an increase in the interest rate due to enhanced housing pledgeability, which crowds out unsecured debt availability for low-wealth households. Higher housing prices elevate the wealth threshold necessary for homeownership due to increased down payment requirements and the minimum purchase constraint. Although non-homeowners lack housing assets on their balance sheets, housing prices impact their consumption through credit market spillovers. A reduction in the loan-to-value ratio constrains mortgage borrowing capacity, thereby decreasing aggregate mortgage demand. This effect on the credit market results in a lower equilibrium interest rate and attenuates consumption inequality across the wealth distribution.

This study examines housing price dynamics during booming cycles and finds a positive relationship between market concentration and price change, with highly concentrated markets experiencing larger surges. A dynamic model supports these findings, showing equilibrium prices decline as the number of firms increases. While limited to boom periods due to the lack of firm-level data, the results highlight the role of market concentration in housing price dynamics.

This project studies how the ambiguity property of an asset affect its liquidity. The ambiguity property might not only affect the asset price. It might affect how people are willing to hold it as a medium of exchange. This paper builds a monetary search model to endogenize liquidity of an ambiguous asset. Ambiguity generates an additional perceived loss if buyers and sellers choose to use the asset in the transaction. This perceived loss does not show in rational expectation models since there would be no room for both parts losing. In this case, there is a pecking order theory: people will use money first. If they still want to transact more goods, they will use the asset next. This implies that the ambiguity property harms liquidity of the asset. In addition, inflation makes the value of money depreciate, and people will be willing to bring assets and use them in transactions.