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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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File URL: http://eprints.lse.ac.uk/25497/
File Function: Open access version.
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Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 25497.

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Length: 57 pages
Date of creation: Apr 2009
Date of revision:
Handle: RePEc:ehl:lserod:25497
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