IDEAS home Printed from https://ideas.repec.org/a/red/issued/18-249.html
   My bibliography  Save this article

High and Low Activity Spells in Housing Markets

Author

Listed:
  • Eric Smith

    (University of Essex)

Abstract

This paper demonstrates the way in which stock-flow matching with endogenous seller entry generates hot and cold spells in house sales. Potential sellers know the number of bidders remaining from the last house sale. If two or more bidders remain, the seller obtains the gains to trade through competitive bidding. The market is active. With one monopolistic bidder, the buyer captures the surplus and sellers become unwilling to enter. The market remains inactive until sellers think enough time has passed for buyer entry to have replenished the market and make entry profitable. The resulting pattern of trade matches up with observations from Dane County, Wisconsin. (Copyright: Elsevier)

Suggested Citation

  • Eric Smith, 2020. "High and Low Activity Spells in Housing Markets," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 36, pages 1-28, April.
    • Handle: RePEc:red:issued:18-249
    DOI: 10.1016/j.red.2019.07.004
    as

    Download full text from publisher

    File URL: https://dx.doi.org/10.1016/j.red.2019.07.004
    Download Restriction: Access to full texts is restricted to ScienceDirect subscribers and institutional members. See https://www.sciencedirect.com/ for details.
    File URL: https://libkey.io/10.1016/j.red.2019.07.004?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Andrew Caplin & John Leahy, 2011. "Trading Frictions and House Price Dynamics," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43, pages 283-303, October.
    2. Genesove, David & Mayer, Christopher J, 1997. "Equity and Time to Sale in the Real Estate Market," American Economic Review, American Economic Association, vol. 87(3), pages 255-269, June.
    3. Albert Saiz, 2010. "The Geographic Determinants of Housing Supply," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(3), pages 1253-1296.
    4. Muellbauer, John & Murphy, Anthony, 1997. "Booms and Busts in the UK Housing Market," Economic Journal, Royal Economic Society, vol. 107(445), pages 1701-1727, November.
    5. Albrecht, James W. & Gautier, Pieter A. & Vroman, Susan B., 2003. "Matching with multiple applications," Economics Letters, Elsevier, vol. 78(1), pages 67-70, January.
    6. L. Rachel Ngai & Silvana Tenreyro, 2014. "Hot and Cold Seasons in the Housing Market," American Economic Review, American Economic Association, vol. 104(12), pages 3991-4026, December.
    7. Ricardo Lagos, 2000. "An Alternative Approach to Search Frictions," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 851-873, October.
    8. Wang, Ruqu, 1993. "Auctions versus Posted-Price Selling," American Economic Review, American Economic Association, vol. 83(4), pages 838-851, September.
    9. Igal Hendel & Aviv Nevo & François Ortalo-Magné, 2009. "The Relative Performance of Real Estate Marketing Platforms: MLS versus FSBOMadison.com," American Economic Review, American Economic Association, vol. 99(5), pages 1878-1898, December.
    10. Carlos Carrillo‐Tudela & Ludo Visschers, 2023. "Unemployment and Endogenous Reallocation Over the Business Cycle," Econometrica, Econometric Society, vol. 91(3), pages 1119-1153, May.
    11. Krainer, John, 2001. "A Theory of Liquidity in Residential Real Estate Markets," Journal of Urban Economics, Elsevier, vol. 49(1), pages 32-53, January.
    12. Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 2016. "Understanding Booms and Busts in Housing Markets," Journal of Political Economy, University of Chicago Press, vol. 124(4), pages 1088-1147.
    13. Allen Head & Huw Lloyd-Ellis & Hongfei Sun, 2014. "Search, Liquidity, and the Dynamics of House Prices and Construction," American Economic Review, American Economic Association, vol. 104(4), pages 1172-1210, April.
    14. Case, Karl E & Shiller, Robert J, 1989. "The Efficiency of the Market for Single-Family Homes," American Economic Review, American Economic Association, vol. 79(1), pages 125-137, March.
    15. François Ortalo-Magné & Sven Rady, 2006. "Housing Market Dynamics: On the Contribution of Income Shocks and Credit Constraints ," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(2), pages 459-485.
    16. Antonia Díaz & Belén Jerez, 2013. "House Prices, Sales, And Time On The Market: A Search‐Theoretic Framework," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54, pages 837-872, August.
    17. 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 1270-1292, December.
    18. Andrews, Martyn J. & Bradley, Steve & Upward, Richard, 2001. "Estimating the probability of a match using microeconomic data for the youth labour market," Labour Economics, Elsevier, vol. 8(3), pages 335-357, June.
    19. Eric F. Smith, 2007. "Limited Duration Employment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(3), pages 444-471, July.
    20. Jeremy C. Stein, 1995. "Prices and Trading Volume in the Housing Market: A Model with Down-Payment Effects," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(2), pages 379-406.
    21. Coles, Melvyn G, 1999. "Turnover Externalities with Marketplace Trading," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 851-868, November.
    22. Coles, Melvyn G & Smith, Eric, 1998. "Marketplaces and Matching," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 239-254, February.
    23. Glaeser, Edward L. & Gyourko, Joseph & Morales, Eduardo & Nathanson, Charles G., 2014. "Housing dynamics: An urban approach," Journal of Urban Economics, Elsevier, vol. 81(C), pages 45-56.
    24. Aaron Hedlund, 2016. "The cyclical dynamics of illiquid housing, debt, and foreclosures," Quantitative Economics, Econometric Society, vol. 7(1), pages 289-328, March.
    25. Gregg, Paul & Petrongolo, Barbara, 2005. "Stock-flow matching and the performance of the labor market," European Economic Review, Elsevier, vol. 49(8), pages 1987-2011, November.
    26. Tim Landvoigt & Monika Piazzesi & Martin Schneider, 2015. "The Housing Market(s) of San Diego," American Economic Review, American Economic Association, vol. 105(4), pages 1371-1407, April.
    27. Elliot Anenberg & Patrick Bayer, 2013. "Endogenous Sources of Volatility in Housing Markets: The Joint Buyer-Seller Problem," NBER Working Papers 18980, National Bureau of Economic Research, Inc.
    28. Glaeser, Edward L. & Gyourko, Joseph & Saiz, Albert, 2008. "Housing supply and housing bubbles," Journal of Urban Economics, Elsevier, vol. 64(2), pages 198-217, September.
    29. Robert Novy‐Marx, 2009. "Hot and Cold Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 37(1), pages 1-22, March.
    30. Kevin Sheedy & Rachel Ngai, 2015. "The Ins and Outs of Selling Houses," 2015 Meeting Papers 214, Society for Economic Dynamics.
    31. Aaron Hedlund, 2014. "The Cyclical Dynamics of Illiquid Housing, Debt, and Foreclosures," Working Papers 1416, Department of Economics, University of Missouri.
    32. Alina Arefeva, 2016. "How Auctions Amplify House-Price Fluctuations," 2016 Meeting Papers 714, Society for Economic Dynamics.
    33. James Albrecht, Pieter Gautier, & Susan Vroman, 2003. "Matching with Multiple Applications: The Limiting Case," Working Papers gueconwpa~03-03-25, Georgetown University, Department of Economics.
    34. Han, Lu & Strange, William C., 2015. "The Microstructure of Housing Markets," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 813-886, Elsevier.
    35. 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, December.
    36. Melvyn G. Coles & Abhinay Muthoo, 1998. "Strategic Bargaining and Competitive Bidding in a Dynamic Market Equilibrium," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 65(2), pages 235-260.
    37. Martyn J. Andrews & Steve Bradley & Dave Stott & Richard Upward, 2013. "Estimating The Stock-Flow Matching Model Using Micro Data," Journal of the European Economic Association, European Economic Association, vol. 11(5), pages 1153-1177, October.
    38. Curtis R. Taylor, 1995. "The Long Side of the Market and the Short End of the Stick: Bargaining Power and Price Formation in Buyers', Sellers', and Balanced Markets," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(3), pages 837-855.
    39. Joseph Gyourko & Albert Saiz, 2006. "Construction Costs And The Supply Of Housing Structure," Journal of Regional Science, Wiley Blackwell, vol. 46(4), pages 661-680, October.
    40. Halket, Jonathan & Pignatti Morano di Custoza, Matteo, 2015. "Homeownership and the scarcity of rentals," Journal of Monetary Economics, Elsevier, vol. 76(C), pages 107-123.
    41. James Albrecht & Axel Anderson & Eric Smith & Susan Vroman, 2007. "Opportunistic Matching In The Housing Market," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(2), pages 641-664, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ngai, Liwa Rachel & Sheedy, Kevin, 2020. "The Ins and Outs of Selling Houses: Understanding Housing Market Volatility," CEPR Discussion Papers 14331, C.E.P.R. Discussion Papers.
    2. Gabrovski, Miroslav & Ortego-Marti, Victor, 2019. "The cyclical behavior of the Beveridge Curve in the housing market," Journal of Economic Theory, Elsevier, vol. 181(C), pages 361-381.
    3. Miroslav Gabrovski & Victor Ortego-Marti, 2021. "On the Slope of the Beveridge Curve in the Housing Market," Working Papers 202105, University of Hawaii at Manoa, Department of Economics.
    4. Gabrovski, Miroslav & Ortego-Marti, Victor, 2021. "Search and credit frictions in the housing market," European Economic Review, Elsevier, vol. 134(C).
    5. Miroslav Gabrovski & Victor Ortego-Marti, 2022. "Home Construction Financing and Search Frictions in the Housing Market," Working Papers 202217, University of California at Riverside, Department of Economics.
    6. Miroslav Gabrovski & Victor Ortego-Marti, 2021. "Efficiency in the Housing Market with Search Frictions," Working Papers 202108, University of California at Riverside, Department of Economics.
    7. Miroslav Gabrovski & Victor Ortego-Marti, 2021. "On the Positive Slope of the Beveridge Curve in the Housing Market," Working Papers 202113, University of California at Riverside, Department of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eric Smith & Zoe Xie & Lei Fang, 2022. "The Short and the Long of It: Stock-Flow Matching in the US Housing Market," CESifo Working Paper Series 10035, CESifo.
    2. repec:esx:essedp:775 is not listed on IDEAS
    3. Han, Lu & Strange, William C., 2015. "The Microstructure of Housing Markets," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 813-886, Elsevier.
    4. Alina Arefeva, 2016. "How Auctions Amplify House-Price Fluctuations," 2016 Meeting Papers 714, Society for Economic Dynamics.
    5. Gabrovski, Miroslav & Ortego-Marti, Victor, 2019. "The cyclical behavior of the Beveridge Curve in the housing market," Journal of Economic Theory, Elsevier, vol. 181(C), pages 361-381.
    6. Leung, Charles Ka Yui & Ng, Joe Cho Yiu, 2018. "Macro Aspects of Housing," MPRA Paper 93512, University Library of Munich, Germany.
    7. Miroslav Gabrovski & Victor Ortego-Marti, 2021. "On the Positive Slope of the Beveridge Curve in the Housing Market," Working Papers 202113, University of California at Riverside, Department of Economics.
    8. DeFusco, Anthony A. & Nathanson, Charles G. & Zwick, Eric, 2022. "Speculative dynamics of prices and volume," Journal of Financial Economics, Elsevier, vol. 146(1), pages 205-229.
    9. Miroslav Gabrovski & Victor Ortego-Marti, 2021. "On the Slope of the Beveridge Curve in the Housing Market," Working Papers 202105, University of Hawaii at Manoa, Department of Economics.
    10. L. Rachel Ngai & Silvana Tenreyro, 2014. "Hot and Cold Seasons in the Housing Market," American Economic Review, American Economic Association, vol. 104(12), pages 3991-4026, December.
    11. Ngai, Liwa Rachel & Sheedy, Kevin, 2020. "The Ins and Outs of Selling Houses: Understanding Housing Market Volatility," CEPR Discussion Papers 14331, C.E.P.R. Discussion Papers.
    12. Allen Head & Huw Lloyd‐Ellis & Derek Stacey, 2023. "Heterogeneity, Frictional Assignment, And Home‐Ownership," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(3), pages 1265-1308, August.
    13. Hedlund, Aaron, 2016. "Illiquidity and its discontents: Trading delays and foreclosures in the housing market," Journal of Monetary Economics, Elsevier, vol. 83(C), pages 1-13.
    14. Eric Smith, 2010. "High and Low Activity Spells in Housing and Labor Markets," 2010 Meeting Papers 943, Society for Economic Dynamics.
    15. Bielecki, Marcin & Stähler, Nikolai, 2022. "Labor Tax Reductions In Europe: The Role Of Property Taxation," Macroeconomic Dynamics, Cambridge University Press, vol. 26(2), pages 419-451, March.
    16. Elliot Anenberg & Patrick Bayer, 2020. "Endogenous Sources Of Volatility In Housing Markets: The Joint Buyer–Seller Problem," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 61(3), pages 1195-1228, August.
    17. Gan, Li & Wang, Pengfei & Zhang, Qinghua, 2018. "Market thickness and the impact of unemployment on housing market outcomes," Journal of Monetary Economics, Elsevier, vol. 98(C), pages 27-49.
    18. Antonia Díaz & Belén Jerez, 2013. "House Prices, Sales, And Time On The Market: A Search‐Theoretic Framework," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(3), pages 837-872, August.
    19. Espen R Moen & Plamen T Nenov & Florian Sniekers, 2021. "Buying First or Selling First in Housing Markets," Journal of the European Economic Association, European Economic Association, vol. 19(1), pages 38-81.
    20. Martijn I. Dröes & Marc K. Francke, 2018. "What Causes the Positive Price-Turnover Correlation in European Housing Markets?," The Journal of Real Estate Finance and Economics, Springer, vol. 57(4), pages 618-646, November.
    21. Genesove, David & Han, Lu, 2012. "Search and matching in the housing market," Journal of Urban Economics, Elsevier, vol. 72(1), pages 31-45.

    More about this item

    Keywords

    Stock-flow matching; Sales fluctuations; Price fluctuations; Time on the market;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:issued:18-249. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Zimmermann (email available below). General contact details of provider: https://edirc.repec.org/data/sedddea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.