IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Hot and cold seasons in the housing markets

  • L.Rachel Ngai
  • Silvana Tenreyro

In the U.K., every year during the second and third quarters (the “hot season”), regional housing markets experience sharp above-trend increases in (quality-adjusted) prices and in the number of transactions. During the fourth and first quarters (the “cold season”), housing prices and the number of transactions fall below trend. A similar seasonal cycle for transactions is observed in other developed countries. Housing prices, however, do not necessarily follow a seasonal pattern in all of them; in particular, in the U.S., while transactions are highly seasonal, prices display no seasonality. We discuss why the traditional asset-pricing approach to the housing market fails at explaining seasonal booms and busts and present a search model that can quantitatively mimic the seasonal fluctuations in transactions and prices in both the U.K. and the U.S. The model features a “thick-market” externality that can generate substantial differences in the number of transactions across seasons. The existence and extent of seasonality in prices depend on the distribution of market power between buyers and sellers. As a by-product, the model sheds new light on the mechanisms governing fluctuations in housing markets and it can be adapted to study lower-frequency movements.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://eprints.lse.ac.uk/4994/
File Function: Open access version.
Download Restriction: no

Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 4994.

as
in new window

Length: 55 pages
Date of creation: May 2008
Date of revision:
Handle: RePEc:ehl:lserod:4994
Contact details of provider: Postal: LSE Library Portugal Street London, WC2A 2HD, U.K.
Phone: +44 (020) 7405 7686
Web page: http://www.lse.ac.uk/

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Brunnermeier, Markus K & Julliard, Christian, 2007. "Money Illusion and Housing Frenzies," CEPR Discussion Papers 6183, C.E.P.R. Discussion Papers.
  2. Barbara Petrongolo & Christopher Pissarides, 2006. "Scale Effects in Markets with Search," Economic Journal, Royal Economic Society, vol. 116(508), pages 21-44, 01.
  3. N. Gregory Mankiw & David N. Weil, 1988. "The Baby Boom, The Baby Bust, and the Housing Market," NBER Working Papers 2794, National Bureau of Economic Research, Inc.
  4. Beaulieu, J Joseph & MacKie-Mason, Jeffrey K & Miron, Jeffrey A, 1992. "Why Do Countries and Industries with Large Seasonal Cycles also Have Large Business Cycles?," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 621-56, May.
  5. 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 1270-92, December.
  6. Monika Piazzesi & Martin Schneider, 2009. "Momentum traders in the housing market: survey evidence and a search model," Staff Report 422, Federal Reserve Bank of Minneapolis.
  7. Stein, Jeremy C, 1995. "Prices and Trading Volume in the Housing Market: A Model with Down-Payment Effects," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 379-406, May.
  8. J. Joseph Beaulieu & Jeffrey A. Miron, 1991. "A Cross Country Comparison of Seasonal Cycles and Business Cycles," Papers 0011, Boston University - Industry Studies Programme.
  9. Karl E. Case & Robert J. Shiller, 1987. "Prices of Single Family Homes Since 1970: New Indexes for Four Cities," NBER Working Papers 2393, National Bureau of Economic Research, Inc.
  10. 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.
  11. John L. Goodman, Jr., 1993. "A Housing Market Matching Model of the Seasonality in Geographic Mobility," Journal of Real Estate Research, American Real Estate Society, vol. 8(1), pages 117-138.
  12. Marjorie Flavin & Shinobu Nakagawa, 2008. "A Model of Housing in the Presence of Adjustment Costs: A Structural Interpretation of Habit Persistence," American Economic Review, American Economic Association, vol. 98(1), pages 474-95, March.
  13. Diamond, Peter A, 1981. "Mobility Costs, Frictional Unemployment, and Efficiency," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 798-812, August.
  14. Poterba, James M, 1984. "Tax Subsidies to Owner-occupied Housing: An Asset-Market Approach," The Quarterly Journal of Economics, MIT Press, vol. 99(4), pages 729-52, November.
  15. Sven Rady & François Ortalo-Magné, 2001. "Housing Market Dynamics: On the Contribution of Income Shocks and Credit Constraints," CESifo Working Paper Series 470, CESifo Group Munich.
  16. Antonia Díaz & Belén Jerez, 2013. "House Prices, Sales, And Time On The Market: A Search‐Theoretic Framework," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54, pages 837-872, 08.
  17. Samuelson, William F, 1984. "Bargaining under Asymmetric Information," Econometrica, Econometric Society, vol. 52(4), pages 995-1005, July.
  18. David Genesove & Christopher Mayer, 2001. "Loss Aversion And Seller Behavior: Evidence From The Housing Market," The Quarterly Journal of Economics, MIT Press, vol. 116(4), pages 1233-1260, November.
  19. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October.
  20. Gautier, P.A. & Teulings, C.N., 2009. "Search and the city," Regional Science and Urban Economics, Elsevier, vol. 39(3), pages 251-265, May.
  21. Barsky, Robert B & Miron, Jeffrey A, 1989. "The Seasonal Cycle and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 503-34, June.
  22. Leslie Rosenthal, 2004. "Efficiency and seasonality in the UK housing market, 1991-2001," Keele Economics Research Papers KERP 2004/05, Centre for Economic Research, Keele University.
  23. Karl E. Case & Robert J. Shiller, 1988. "The Efficiency of the Market for Single-Family Homes," NBER Working Papers 2506, National Bureau of Economic Research, Inc.
  24. Muellbauer, J & Murphy, A, 1996. "Booms and Busts in the UK Housing Market," Economics Papers 125, Economics Group, Nuffield College, University of Oxford.
  25. Krainer, John, 2001. "A Theory of Liquidity in Residential Real Estate Markets," Journal of Urban Economics, Elsevier, vol. 49(1), pages 32-53, January.
  26. Burdett, Kenneth, 1996. "Truncated means and variances," Economics Letters, Elsevier, vol. 52(3), pages 263-267, September.
  27. Morris A. Davis & Andreas Lehnert & Robert F. Martin, 2005. "The Rent-Price Ratio for the Aggregate Stock of Owner-Occupied Housing," Urban/Regional 0509019, EconWPA.
  28. Coles, Melvyn G & Smith, Eric, 1994. "Marketplaces and Matching," CEPR Discussion Papers 1048, C.E.P.R. Discussion Papers.
  29. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, June.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ehl:lserod:4994. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (LSERO Manager)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.