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Here Lives a Wealthy Man: Price Rigidity and Predictability in Luxury Housing Markets

Author

Listed:
  • Daniel Levy

    (International School of Economics at Tbilisi State University; Department of Economics, Bar-Ilan University; Department of Economics, Emory University; Rimini Center for Economic Analysis, ITALY;)

  • Avichai Snir

    (Department of Banking and Finance, Netanya Academic College, Netanya 42365, ISRAEL)

Abstract

We use novel and unique data to study the effect of price changes in the market for luxury and middle class homes. We find that luxury home sales respond less to price changes than the middle-class home sales; in the market for luxury homes, past prices affect current prices; luxury home prices persist; and prices of luxury homes are stickier than prices of middle-class homes. Recent macroeconomic models predict that housing markets can have counter-cyclical effect, if home prices are flexible. Our findings imply that home prices, especially luxury home prices, may not be flexible enough to generate such effect.

Suggested Citation

  • Daniel Levy & Avichai Snir, 2018. "Here Lives a Wealthy Man: Price Rigidity and Predictability in Luxury Housing Markets," Working Papers 001-18 JEL Codes: E31, E3, International School of Economics at TSU, Tbilisi, Republic of Georgia.
    • Handle: RePEc:tbs:wpaper:18-001
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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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