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Hot and Cold Seasons in the Housing Market

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  • L. Rachel Ngai
  • Silvana Tenreyro

Abstract

Every year housing markets in the United Kingdom and the United States experience systematic above-trend increases in prices and transactions during the spring and summer ("hot season") and below-trend falls during the autumn and winter ("cold season"). House price seasonality poses a challenge to existing housing models. We propose a search-and-matching model with thick-market effects. In thick markets, the quality of matches increases, rising buyers' willingness to pay and sellers' desire to transact. A small, deterministic driver of seasonality can be amplified and revealed as deterministic seasonality in transactions and prices, quantitatively mimicking seasonal fluctuations in UK and US markets. (JEL C78, R21, R31)

Suggested Citation

  • L. Rachel Ngai & Silvana Tenreyro, 2014. "Hot and Cold Seasons in the Housing Market," American Economic Review, American Economic Association, vol. 104(12), pages 3991-4026, December.
  • Handle: RePEc:aea:aecrev:v:104:y:2014:i:12:p:3991-4026
    Note: DOI: 10.1257/aer.104.12.3991
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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