The market for housing differs in several important ways from the textbook model of a liquid asset market with exogenous fundamentals. This implies that the price at which a house is sold can be influenced not only by general supply and demand conditions, but also by idiosyncratic factors, including the urgency of the sale and the effects of the ownership transfer on the physical quality of the house. First, houses are productive only when people are living in them. Owning an empty house is equivalent to throwing away the dividend on a financial asset. Second, houses are fragile assets that need maintenance and are vulnerable to vandalism. Unoccupied houses are particularly vulnerable and expensive to protect. Third, short-term rental contracts involve high transaction costs, resulting from the moving costs of renters and the need of homeowners to protect their property against damage. Fourth, houses are expensive, indivisible, and heterogeneous assets. Each house has certain unique characteristics which are likely to appeal to certain potential buyers and not to others, so selling a house requires matching it with an appropriate buyer. Because of the high costs of intermediation in housing, this task is normally undertaken by a real estate broker rather than a dealer. Fifth, most homeowners must finance their purchases using mortgages, and collateralized debt contracts that transfer home ownership to the mortgage lender through a foreclosure process if the homeowner defaults. The expansion of mortgage credit in the early 2000s and the recent decline in house prices have led to an unprecedented increase in foreclosures since 2006. Foreclosures transfer houses to financial institutions which must maintain and protect them until they can be sold. Foreclosed houses are likely to sell at low prices, both because they may have been physically damaged during the foreclosure process, and because financial institutions have an incentive to sell them quickly. In a liquid market, an asset can be sold rapidly with a minimal impact on its price.