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Hot And Cold Seasons in the Housing Market

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  • Silvana Tenreyro

    (LSE)

  • Rachel Ngai

    (LSE)

Abstract

Every year during the second and third quarters (the "hot season") housing markets in the U.K. and the U.S. experience systematic above-trend increases in both prices and transactions. During the fourth and first quarters (the "cold season"), housing prices and transactions fall below trend. A similar seasonal cycle is observed in other developed countries. We present a search-and-matching model that can quantitatively mimic the seasonal fluctuations in transactions and prices observed in the U.K. and the U.S. The model features a "thick-market" effect that can generate substantial differences in the volume of transactions and prices across seasons, with the extent of seasonality in prices depending positively on the bargaining power of sellers. As a by-product, the model sheds new light on the mechanisms governing fluctuations in housing markets and can be adapted to study lower-frequency movements in prices and transactions.

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2009 Meeting Papers with number 955.

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Date of creation: 2009
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Handle: RePEc:red:sed009:955

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References

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Citations

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Cited by:
  1. Genesove, David & Han, Lu, 2012. "Search and matching in the housing market," Journal of Urban Economics, Elsevier, vol. 72(1), pages 31-45.
  2. James Albrecht & Pieter A. Gautier & Susan Vroman, 2010. "Directed Search in the Housing Market," Tinbergen Institute Discussion Papers 10-005/3, Tinbergen Institute.
  3. Akkoyun, H. Cagri & Arslan, Yavuz & Kanik, Birol, 2013. "Housing prices and transaction volume," Journal of Housing Economics, Elsevier, vol. 22(2), pages 119-134.
  4. Antonia Díaz & Belén Jerez, 2010. "House prices, sales, and time on the market : a search-theoretic framework (Supplementary material)," Economics Working Papers we1034, Universidad Carlos III, Departamento de Economía.
  5. Bracke, Philippe, 2013. "How long do housing cycles last? A duration analysis for 19 OECD countries," Journal of Housing Economics, Elsevier, vol. 22(3), pages 213-230.
  6. S. Boragan Aruoba & Morris A. Davis & Randall Wright, 2012. "Homework in Monetary Economics: Inflation, Home Production, and the Production of Homes," NBER Working Papers 18276, National Bureau of Economic Research, Inc.
  7. Selcuk, Cemil, 2010. "Motivated Sellers in the Housing Market," Cardiff Economics Working Papers E2010/2, Cardiff University, Cardiff Business School, Economics Section.
  8. Selcuk, Cemil, 2012. "Seasonal Cycles in the Housing Market," Cardiff Economics Working Papers E2012/1, Cardiff University, Cardiff Business School, Economics Section.
  9. Alessi, Lucia & Detken, Carsten, 2011. "Quasi real time early warning indicators for costly asset price boom/bust cycles: A role for global liquidity," European Journal of Political Economy, Elsevier, vol. 27(3), pages 520-533, September.
  10. Yu Zhu & Randall Wright & Chao He, 2013. "Housing and Liquidity," 2013 Meeting Papers 168, Society for Economic Dynamics.
  11. Masanori Kashiwagi, . "Sunspots and Self-Fulfilling Beliefs in the U.S. Housing Market," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics.

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