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Hot and Cold Seasons in the Housing Market

  • L. Rachel Ngai
  • Silvana Tenreyro

Every year during the second and thirdquarters (the "hot season") housing markets in the UK and the US experience systematic above-trend increases in both prices and transactions. During the fourth and first quarters (the "cold season"), house prices and transactions fall below trend. We propose a search-and-matching framework that sheds new light on the mechanisms governing housing market fluctuations. The model has 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 crucially on the bargaining power of sellers. The model can quantitatively mimic the seasonal fluctuations in transactions and prices observed in the UK and the US.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0922.

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Date of creation: Apr 2009
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Handle: RePEc:cep:cepdps:dp0922
Contact details of provider: Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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