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Price and Transaction Volume in the Dutch Housing Market

Author

Listed:
  • 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.

Suggested Citation

  • Erik R. de Wit & Peter Englund & Marc Francke, 2010. "Price and Transaction Volume in the Dutch Housing Market," Tinbergen Institute Discussion Papers 10-039/2, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20100039
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    References listed on IDEAS

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    More about this item

    Keywords

    price-volume correlation; time-on-the-market; vector error correction model;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E29 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Other
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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