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The Thick Market Effect on Housing Markets Transactions

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  • Li Gan
  • Qinghua Zhang

Abstract

This paper provides a search model for housing market where the number of buyers and/or sellers plays very important role. The model makes three testable predictions: (1) the unemployment rate has a negative impact on the trading volume and the sale prices of the housing market; (2) a larger housing market has a lower average sale price, shorter time-to-sale and smaller price dispersion, in addition to a lower vacancy rate. (3) In a larger housing market, when the unemployment rate goes up (or down), the sale price decreases (or increases) by a smaller percentage than in a smaller market. All three predictions are supported by a panel dataset of the Texas city-level housing markets.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12134.

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Date of creation: Apr 2006
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Publication status: published as Gan, Li and Qinghua Zhang. “The Thick Market Effect of Local Unemployment Rate Fluctuations.” Journal of Econometrics 133(2006): 127-152.
Handle: RePEc:nbr:nberwo:12134

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References

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  1. David Genesove & Christopher Mayer, . "Loss Aversion and Seller Behavior: Evidence from the Housing Market," Zell/Lurie Center Working Papers 323, Wharton School Samuel Zell and Robert Lurie Real Estate Center, University of Pennsylvania.
  2. David Genesove & Christopher J. Mayer, 1993. "Equity and time to sale in the real estate market," Working Papers 93-6, Federal Reserve Bank of Boston.
  3. Gan, Li & Zhang, Qinghua, 2006. "The thick market effect on local unemployment rate fluctuations," Journal of Econometrics, Elsevier, vol. 133(1), pages 127-152, July.
  4. Coles, Melvyn G & Smith, Eric, 1994. "Marketplaces and Matching," CEPR Discussion Papers 1048, C.E.P.R. Discussion Papers.
  5. Ricardo Lagos, 2000. "An Alternative Approach to Search Frictions," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 851-873, October.
  6. 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.
  7. 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.
  8. James M. Poterba, 1983. "Tax Subsidies to Owner-occupied Housing: An Asset Market Approach," Working papers 339, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
  10. Richard Arnott, 1988. "Housing Vacancies, Thin Markets, and Idiosyncratic Tastes," Working Papers 722, Queen's University, Department of Economics.
  11. Mayer Christopher J., 1995. "A Model of Negotiated Sales Applied to Real Estate Auctions," Journal of Urban Economics, Elsevier, vol. 38(1), pages 1-22, July.
  12. Kenneth Burdett & Shouyong Shi & Randall Wright, 2001. "Pricing and Matching with Frictions," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 1060-1085, October.
  13. Barton A. Smith & William P. Tesarek, 1991. "House Prices and Regional Real Estate Cycles: Market Adjustments in Houston," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 19(3), pages 396-416.
  14. Li Gan & Qi Li, 2004. "Efficiency of Thin and Thick Markets," NBER Working Papers 10815, National Bureau of Economic Research, Inc.
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Cited by:
  1. Van Butsic & Ellen Hanak & Robert G. Valletta, 2008. "Climate change and asset prices: hedonic estimates for North American ski resorts," Working Paper Series 2008-12, Federal Reserve Bank of San Francisco.

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