UC Riverside

This dissertation studies home renovation in housing market dynamics, combining search-and-matching theory with new empirical evidence from the United States. The three chapters examine how renovation interacts with housing market frictions, credit market frictions, and household collateral constraints. Chapter 1 develops a search-and-matching model with endogenous renovation. Using aggregate U.S. data, I document new stylized facts: renovation comoves positively with prices, vacancies, and sales, and negatively with time-on-market. The calibrated model replicates these elasticities and shows that endogenous renovation is an essential adjustment margin. Chapter 2 adds a frictional credit market for renovation financing. Calibrated to the 2012–2019 U.S. housing recovery, the model implies that the credit channel barely affects average prices but accounts for about 64% and 71% of the declines in time-to-sell and the vacancy rate, through a novel compositional channel of liquidity. Chapter 3 turns to the data. Using loan-level HMDA data for 2011–2024 and an instrumental variables design adapted from Chaney, Sraer, and Thesmar (2012), we identify a household collateral channel operating through renovation credit, concentrated where households hold more pledgeable collateral. Collectively, the chapters establish renovation as an important channel linking housing markets, credit markets, and household collateral.