“Fire Sales” in housing market: is the house-searching process similar to a theme park visit?

Leung, Charles Ka Yui and Zhang, Jun (2011): “Fire Sales” in housing market: is the house-searching process similar to a theme park visit?

Abstract

Three striking empirical regularities have been repeatedly reported: the positive correlation between housing prices and trading volume, between housing price and the time-on-the-market (TOM), and the existence of price dispersion. This short paper provides perhaps the first unifying framework which mimics these phenomena in a simple competitive search framework. In the equilibrium, sellers with heterogeneous waiting cost and buyers are endogenously segregated into different submarkets, each with distinct market tightness and prices. With endogenous search effort, our model also reproduces the well-documented price-volume correlation. Directions for future research are also discussed.

• Item Type: MPRA Paper
• Language: English
• Keywords: housing market, competitive search, price dispersion, trading volume, time on the market
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E30 - General; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search ; Learning ; Information and Knowledge ; Communication ; Belief ; Unawareness; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R2 - Household Analysis > R21 - Housing Demand

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