This paper studies how moving costs affect household mobility, welfare, and residential sorting within U.S. metropolitan areas. We develop a dynamic model of neighborhood choice and estimate moving costs using data on more than 3.5 million homeowners from the American Community Survey. Our results show that realtor commissions substantially increase misallocation by reducing mobility, especially in high-cost housing markets. Counterfactual simulations indicate that halving commission rates would significantly increase mobility and generate large welfare gains. An analysis of optimal policy indicates that a simple, nationally set commission level could capture up to 98% of hypothetical first-best welfare gains.
Real Estate Department