Heterogeneity in house price dynamics
AbstractTo what extent do house price dynamics differ across market segments? And what determines this heterogeneity? We address these questions by analysing a data set of individual houses and mortgages, based on a survey of about 2,000 Dutch households over the period 2003–2011. We estimate a dynamic panel data model of house price dynamics by means of the Arellano-Bond estimator. Three main empirical results emerge. First, we generally find that house price dynamics imply a convergence towards their long-run equilibrium value, as indicated by a negative serial correlation coefficient and a positive estimated mean reversion coefficient. Second, there is evidence that the housing market in the Netherlands is inefficient. Third, there is important heterogeneity across different market segments. We document that the speed of convergence of house price dynamics and the efficiency of housing markets depends on the geographical location and degree of urbanization, the type and year of construction of a house, the type of mortgage financing and households’ sentiment about the medium-term outlook for income.
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Bibliographic InfoPaper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 371.
Date of creation: Feb 2013
Date of revision:
Housing market dynamics; house prices; heterogeneity; survey data; panel analysis;
Find related papers by JEL classification:
- D14 - Microeconomics - - Household Behavior - - - Personal Finance
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Production Analysis, and Firm Location - - - Other Production and Pricing Analysis
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