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The Cyclical Behavior of the Beveridge Curve in the Housing Market

Author

Listed:
  • Miroslav Gabrovski

    (University of Hawaii Manoa)

  • Victor Ortego-Marti

    (Department of Economics, University of California Riverside)

Abstract

This paper develops a business cycle model of the housing market with search frictions and entry of both buyers and sellers. The housing market exhibits a well-established cyclical component, which features three stylized facts: prices move in the same direction as sales and the number of houses for sale, but opposite to the time it takes to sell a house. These stylized facts imply that in the data housing vacancies and the number of buyers are positively correlated, i.e. that the Beveridge Curve is upward sloping. A baseline search and matching model of the housing market is unable to match these stylized facts because it inherently generates a downward sloping Beveridge Curve. With free entry of both buyers and sellers, our model reproduces the positive correlation between prices, sales and vacancies, and matches the stylized facts qualitatively and quantitatively.

Suggested Citation

  • Miroslav Gabrovski & Victor Ortego-Marti, 2019. "The Cyclical Behavior of the Beveridge Curve in the Housing Market," Working Papers 201911, University of California at Riverside, Department of Economics.
    • Handle: RePEc:ucr:wpaper:201911
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    1. The Cyclical Behavior of the Beveridge Curve in the Housing Market
      by Christian Zimmermann in NEP-DGE blog on 2019-11-05 21:08:01

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    Cited by:

    1. L. Rachel Ngai & Kevin D. Sheedy, 2024. "The Ins And Outs Of Selling Houses: Understanding Housing‐Market Volatility," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(3), pages 1415-1440, August.
    2. N. Edward Coulson & Thao Le & Victor Ortego-Marti & Lily Shen, 2024. "Tenant Rights, Eviction, and Rent Affordability," Working Papers 202404, University of California at Riverside, Department of Economics.
    3. Miroslav Gabrovski & Victor Ortego-Marti, 2021. "On the Slope of the Beveridge Curve in the Housing Market," Working Papers 202105, University of Hawaii at Manoa, Department of Economics.
    4. Gabrovski, Miroslav & Ortego-Marti, Victor, 2021. "Search and credit frictions in the housing market," European Economic Review, Elsevier, vol. 134(C).
    5. Miroslav Gabrovski & Victor Ortego-Marti, 2024. "On the slope of the Beveridge curve in the housing market," Economics Bulletin, AccessEcon, vol. 44(3), pages 948-960.
    6. Miroslav Gabrovski & Victor Ortego-Marti, 2025. "Home Construction Financing and Search Frictions in the Housing Market," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 55, January.
    7. Gabrovski, Miroslav & Kospentaris, Ioannis, 2021. "Intermediation in over-the-counter markets with price transparency," Journal of Economic Theory, Elsevier, vol. 198(C).
    8. Elliot Anenberg & Daniel R. Ringo, 2022. "Volatility in Home Sales and Prices: Supply or Demand?," Finance and Economics Discussion Series 2022-041, Board of Governors of the Federal Reserve System (U.S.).
    9. Lukasz Mach & Dariusz Zmarzly & Ireneusz Dabrowski & Pawel Fracz, 2020. "Comparison on Subannual Seasonality of Building Construction in European Countries," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 241-257.
    10. Anenberg, Elliot & Ringo, Daniel, 2024. "Volatility in Home Sales and Prices: Supply or Demand?," Journal of Urban Economics, Elsevier, vol. 139(C).
    11. Miroslav Gabrovski & Victor Ortego-Marti, 2021. "Efficiency in the Housing Market with Search Frictions," Working Papers 202108, University of California at Riverside, Department of Economics.
    12. Miroslav Gabrovski & Victor Ortego-Marti, 2021. "On the Positive Slope of the Beveridge Curve in the Housing Market," Working Papers 202113, University of California at Riverside, Department of Economics.
    13. Vandenbergh, Joren, 2024. "Seller and search behavior in the Belgian housing market," Journal of Housing Economics, Elsevier, vol. 64(C).

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    More about this item

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • 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
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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