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Real estate liquidity

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  • John Krainer

Abstract

Residential real estate markets often go through "hot" and "cold" periods. A hot market is one where prices are rising, liquidity is good in that average selling times are short, and the volume of transactions is higher than the norm. Cold markets have just the opposite characteristics - prices are falling, liquidity is poor, and volume is low. In this paper I show how liquidity depends on the value of the housing service flow, which in turn reflects the aggregate state of the economy. I use data from the San Francisco Bay Area to investigate the relationship between marketing times and state variables such as the interest rate and job growth.

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Bibliographic Info

Article provided by Federal Reserve Bank of San Francisco in its journal Economic Review.

Volume (Year): (1999)
Issue (Month): ()
Pages: 14-26

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Handle: RePEc:fip:fedfer:y:1999:p:14-26:n:3

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Keywords: Real property ; Liquidity (Economics);

References

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  1. Jeremy C. Stein, 1993. "Prices and Trading Volume in the Housing Market: A Model with Downpayment Effects," NBER Working Papers 4373, National Bureau of Economic Research, Inc.
  2. Donald Haurin, 1988. "The Duration of Marketing Time of Residential Housing," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 16(4), pages 396-410.
  3. John Krainer & Stephen F. LeRoy, 2002. "Equilibrium valuation of illiquid assets," Economic Theory, Springer, vol. 19(2), pages 223-242.
  4. Gabriel, Stuart A. & Mattey, Joe P. & Wascher, William L., 2003. "Compensating differentials and evolution in the quality-of-life among U.S. states," Regional Science and Urban Economics, Elsevier, vol. 33(5), pages 619-649, September.
  5. Stuart A. Gabriel & Joe P. Mattey & William L. Wascher, 1999. "House price differentials and dynamics: evidence from the Los Angeles and San Francisco metropolitan areas," Economic Review, Federal Reserve Bank of San Francisco, pages 3-22.
  6. Richard Arnott, 1988. "Housing Vacancies, Thin Markets, and Idiosyncratic Tastes," Working Papers 722, Queen's University, Department of Economics.
  7. Nancy E. Wallace, 1996. "Hedonic-based price indexes for housing: theory, estimation, and index construction," Economic Review, Federal Reserve Bank of San Francisco, pages 34-48.
  8. Wheaton, William C, 1990. "Vacancy, Search, and Prices in a Housing Market Matching Model," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1270-92, December.
  9. Williams, Joseph T, 1995. "Pricing Real Assets with Costly Search," Review of Financial Studies, Society for Financial Studies, vol. 8(1), pages 55-90.
  10. Lippman, Steven A & McCall, John J, 1986. "An Operational Measure of Liquidity," American Economic Review, American Economic Association, vol. 76(1), pages 43-55, March.
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Cited by:
  1. Chihiro Shimizu & Kiyohiko G. Nishimura & Yasushi Asami, 2003. "Measuring the Cost of Imperfect Information in the Tokyo Housing Market," CIRJE F-Series CIRJE-F-238, CIRJE, Faculty of Economics, University of Tokyo.

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