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Supply, Demand and Prices in the US Housing Market

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Author Info

  • Thomas Conefrey

    (Central Bank of Ireland)

  • Karl Whelan

    (University College Dublin)

Abstract

The slowdown in the US economy in 2008, and in the housing mark et in particular, has been accompanied by a sharp fall in house prices and a glut of homes for sale on the market. While the idea that this overhang of dwellings for sale should place downward pressure on house prices is intuitive, little empirical work has been done in this area. This paper explicitly models the relationship between changes in house prices and various measures of housing supply. The results show that months supply of new homes places greater downward pressure on house prices than the months supply of existing homes. We build a small simulation model to examine the evolution of the housing market.

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File URL: http://www.ucd.ie/t4cms/WP13_07.pdf
File Function: First version, 2013
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Bibliographic Info

Paper provided by School Of Economics, University College Dublin in its series Working Papers with number 201307.

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Length: 48 pages
Date of creation: 24 Jul 2013
Date of revision:
Handle: RePEc:ucn:wpaper:201307

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Keywords: Housing market; supply; prices;

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  1. Zuehlke, Thomas W, 1987. "Duration Dependence in the Housing Market," The Review of Economics and Statistics, MIT Press, vol. 69(4), pages 701-04, November.
  2. Antonia Díaz & Belén Jerez, 2010. "House prices, sales, and time on the market : a search-theoretic framework," Economics Working Papers we1033, Universidad Carlos III, Departamento de Economía.
  3. 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.
  4. Krainer, John, 2001. "A Theory of Liquidity in Residential Real Estate Markets," Journal of Urban Economics, Elsevier, vol. 49(1), pages 32-53, January.
  5. Nathalie Girouard & Mike Kennedy & Paul van den Noord & Christophe André, 2006. "Recent House Price Developments: The Role of Fundamentals," OECD Economics Department Working Papers 475, OECD Publishing.
  6. Pissarides, Christopher A, 1985. "Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages," American Economic Review, American Economic Association, vol. 75(4), pages 676-90, September.
  7. Vladimir Klyuev, 2008. "What Goes Up Must Come Down? House Price Dynamics in the United States," IMF Working Papers 08/187, International Monetary Fund.
  8. Williams, Joseph T, 1995. "Pricing Real Assets with Costly Search," Review of Financial Studies, Society for Financial Studies, vol. 8(1), pages 55-90.
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