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Search and Predictability of Prices in the Housing Market

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  • Timmermann, Allan
  • Møller, Stig
  • Pedersen, Thomas
  • Schütte, Erik Christian Montes

Abstract

We develop a new housing seach index (HSI) extracted from online search activity on a limited set of keywords related to the house buying process. We show that HSI has strong predictive power for subsequent changes in house prices, both in-sample and out-of-sample, and after controlling for the effect of commonly used predictors. Compared to the stock market, online search has much stronger predictive power over house prices and its effect also lasts longer. Variation in housing search is a particularly strong predictor of subsequent price changes in markets with inelastic housing supply and high speculation.

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  • Timmermann, Allan & Møller, Stig & Pedersen, Thomas & Schütte, Erik Christian Montes, 2021. "Search and Predictability of Prices in the Housing Market," CEPR Discussion Papers 15875, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:15875
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    More about this item

    Keywords

    Internet search; Housing markets; Housing demand; Forecasting; Inelastic housing supply;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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