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Price and Transaction Volume in the Dutch Housing Market

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  • Erik R. de Wit

    (University of Amsterdam)

  • Peter Englund

    (Stockholm School of Economics, University of Amsterdam)

  • Marc Francke

    (University of Amsterdam)

Abstract

Housing markets typically exhibit a strong positive correlation between the rate of price increase and the number of houses sold. We document this correlation on high-quality Dutch data for the period 1985-2007, and estimate a VEC-model that allows us to study the mechanism giving rise to the correlation. The data identify the flows of new houses offered for sale as well as the number of houses sold. According to the estimated model, shocks to market fundamentals (the mortgage rate)have an immediate and significant impact on the rate of sale, little impact on the rate of entry of new houses for sale, and a gradual impact on the house prices. This pattern is consistent with a search model where buyers and sellers gradually learn about changes in market conditions.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 10-039/2.

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Date of creation: 13 Apr 2010
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Handle: RePEc:dgr:uvatin:20100039

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Web page: http://www.tinbergen.nl

Related research

Keywords: price-volume correlation; time-on-the-market; vector error correction model;

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  1. François Ortalo-Magné & Sven Rady, 2002. "Housing Market Dynamics: On the Contribution of Income Shocks and Credit Constraints," Wisconsin-Madison CULER working papers 02-01, University of Wisconsin Center for Urban Land Economic Research.
  2. Francois Ortalo-Magne & Sven Rady, 1998. "Boom In, Bust Out: Young Households and the Housing Price Cycle," Finance 9810004, EconWPA, revised 25 Oct 1998.
  3. Ortalo-Magne, Francois & Rady, Sven, 2004. "Housing Transactions and Macroeconomic Fluctuations: A Case Study of England," 2004 Meeting Papers 207c, Society for Economic Dynamics.
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