Anticipated vs. Unanticipated House Price Movements and Transaction Volume

Arslan, Yavuz and Kanik, Birol and Köksal, Bülent (2014): Anticipated vs. Unanticipated House Price Movements and Transaction Volume.

Abstract

Using data from England and Wales, we analyze the relationship between house prices and transaction volume (number of houses sold) and find that there is a negative relationship. When we decompose price changes into anticipated and unanticipated components we find that while anticipated house price changes positively affect transaction volume, unanticipated price changes have a negative effect. These findings give insights for the theories which try to explain the relationship between house prices and transaction volume. Our findings are inconsistent with the down-payment effect approach developed by Stein (1995) and with the loss aversion behavior approach discussed by Genesove and Mayer (2001). However, our results support the evidence of asymmetric decisions on the buyer and seller side documented in Case and Shiller (1988).

• Item Type: MPRA Paper
• Language: English
• Keywords: house prices; expectations; transaction volume
• Subjects: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty; G - Financial Economics > G1 - General Financial Markets; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location

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