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Information frictions and housing market dynamics

  • Elliot Anenberg
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    This paper examines the effects of seller uncertainty over their home value on the housing market. Using evidence from a new dataset on home listings and transactions, I first show that sellers do not have full information about current period demand conditions for their homes. I incorporate this type of uncertainty into a dynamic search model of the home selling problem with Bayesian learning. Simulations of the estimated model show that information frictions help explain short-run persistence in price appreciation rates and a positive (negative) correlation between price changes and sales volume (time on market).

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    File URL: http://www.federalreserve.gov/pubs/feds/2012/201248/201248abs.html
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    File URL: http://www.federalreserve.gov/pubs/feds/2012/201248/201248pap.pdf
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    Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2012-48.

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    Date of creation: 2012
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    Handle: RePEc:fip:fedgfe:2012-48
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