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Hot and Cold Seasons in the Housing Market

  • Ngai, Liwa Rachel
  • Tenreyro, Silvana

Every year housing markets in the United Kingdom and the United States experience systematic above-trend increases in both prices and transactions during the second and third quarters (the "hot season") and below-trend falls during the fourth and first quarters (the "cold season"). House price seasonality poses a challenge to existing models of the housing market. To explain seasonal patterns, this paper develops a matching model that emphasizes the role of match-specific quality between the buyer and the house and the presence of thick-market effects in housing markets. It shows that a small, deterministic driver of seasonality can be amplified and revealed as deterministic seasonality in transactions and prices, quantitatively mimicking the seasonal fluctuations in transactions and prices observed in the United Kingdom and the United States.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9427.

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Date of creation: Apr 2013
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Handle: RePEc:cpr:ceprdp:9427
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