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Can the Montersen-Pissarides Model Match the Housing Market Facts?

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Listed author(s):
  • Gaetano Lisi

    ()

    (Department of Economics and Law, University of Cassino and Southern Lazio)

Abstract

In the housing markets three basic facts have been repeatedly reported by empirical studies: the existence of price dispersion, the positive correlation between housing price and timeon-the-market, and between housing price and trading volume. Since housing markets are characterised by a decentralised framework of exchange with important search and matching frictions, this paper examines whether the baseline search and matching model can account for these three basic facts. We find that the standard matching framework allows to obtain a direct relationship between market frictions and house prices which represents the key mechanism to explain the basic facts of the housing market.

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File URL: ftp://147.156.210.157/RePEc/pdf/eec_1312.pdf
File Function: First version, 2013
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Paper provided by Department of Applied Economics II, Universidad de Valencia in its series Working Papers with number 1312.

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Length: 12 pages
Date of creation: May 2013
Handle: RePEc:eec:wpaper:1312
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Keywords: Matching models; Housing markets; Time-on-the-market; Housing price dispersion; Trading volume;

Other versions of this item:

Find related papers by JEL classification:
  • 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
  • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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  1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, July.
  2. Charles Leung & Youngman Leong & Siu Wong, 2006. "Housing Price Dispersion: An Empirical Investigation," The Journal of Real Estate Finance and Economics, Springer, vol. 32(3), pages 357-385, May.
  3. Anglin, Paul M & Rutherford, Ronald & Springer, Thomas M, 2003. "The Trade-Off Between the Selling Price of Residential Properties and Time-on-the-Market: The Impact of Price Setting," The Journal of Real Estate Finance and Economics, Springer, vol. 26(1), pages 95-111, January.
  4. James Albrecht & Pieter Gautier & Susan Vroman, 2016. "Directed Search in the Housing Market," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 19, pages 218-231, January.
  5. Etienne Wasmer & Philippe Weil, 2004. "The Macroeconomics of Labor and Credit Market Imperfections," American Economic Review, American Economic Association, vol. 94(4), pages 944-963, September.
  6. Genesove, David & Han, Lu, 2012. "Search and matching in the housing market," Journal of Urban Economics, Elsevier, vol. 72(1), pages 31-45.
  7. Charles Ka Yui Leung & Jun Zhang, 2011. "¡§Fire Sales¡¨ in Housing Market: Is the House- Search Process Similar to a Theme Park Visit?," International Real Estate Review, Asian Real Estate Society, vol. 14(3), pages 311-329.
  8. Christopher A. Pissarides & Barbara Petrongolo, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June.
  9. Andrew Caplin & John Leahy, 2011. "Trading Frictions and House Price Dynamics," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43, pages 283-303, October.
  10. 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.
  11. Gaetano Lisi, 2011. "The Hedonic Price Function in a Matching Model of Housing Market," Economics Bulletin, AccessEcon, vol. 31(3), pages 2347-2355.
  12. Krainer, John, 2001. "A Theory of Liquidity in Residential Real Estate Markets," Journal of Urban Economics, Elsevier, vol. 49(1), pages 32-53, January.
  13. 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 1270-1292, December.
  14. Jeffrey Fisher & Dean Gatzlaff & David Geltner & Donald Haurin, 2003. "Controlling for the Impact of Variable Liquidity in Commercial Real Estate Price Indices," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 31(2), pages 269-303, 06.
  15. Vukina, Tomislav & Zheng, Xiaoyong, 2010. "Bargaining, Search, and Price Dispersion: Evidence from the Live Hogs Market," Agricultural and Resource Economics Review, Cambridge University Press, vol. 39(03), pages 534-546, October.
  16. Robert Novy-Marx, 2009. "Hot and Cold Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 37(1), pages 1-22.
  17. Merlo, Antonio & Ortalo-Magne, Francois, 2004. "Bargaining over residential real estate: evidence from England," Journal of Urban Economics, Elsevier, vol. 56(2), pages 192-216, September.
  18. Brian Petereson, 2009. "Fooled by Search: Housing Prices, Turnover and Bubbles," Caepr Working Papers 2009-004, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
  19. Jos Janssen & Bert Kruijt & Barrie Needham, 1994. "The Honeycomb Cycle in Real Estate," Journal of Real Estate Research, American Real Estate Society, vol. 9(2), pages 237-252.
  20. James Albrecht & Axel Anderson & Eric Smith & Susan Vroman, 2007. "Opportunistic Matching In The Housing Market," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(2), pages 641-664, 05.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Can the Mortensen-Pissarides Model Match the Housing Market Facts?
    by Christian Zimmermann in NEP-DGE blog on 2013-05-23 00:59:53

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