The Roback-model showed that location decisions of households are to be considered simultaneously from a labour market and a housing market perspective. In this paper we develop, and empirically test, a model that integrates the utility and production function so that individual location decisions of workers, i.e. residents, are determined via both markets simultaneously. We do so by applying a finite mixture model which allows us to correct for unobserved idiosyncratic shocks, where the identification is based upon the correlation of individual behavior in both markets. Using an extensive micro panel-data set in which Dutch home owners are followed over time in both the housing and labour market, we test the model and investigate which individual and urban characteristics determine location decisions. With this model, we are thus able to further explain sorting based on observed heterogeneous home-owner characteristics.