Saturday, December 6, 2014

Housing markets through thick and thin (and back again)

A paper in the December AER discusses seasonality in the housing market: when the market is thick, better match quality raises prices...

Hot and Cold Seasons in the Housing Market
By L. Rachel Ngai and Silvana Tenreyro

"Every year housing markets in the United Kingdom and the United
States experience systematic above-trend increases in prices and
transactions during the spring and summer (“hot season”) and
below-trend falls during the autumn and winter (“cold season”).
House price seasonality poses a challenge to existing housing models.
We propose a search-and-matching model with thick-market effects.
In thick markets, the quality of matches increases, rising buyers’ willingness
to pay and sellers’ desire to transact. "

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