Revisiting supply and demand indexes in real estate

Dorinth van Dijk, David Geltner and Alex van de Minne

ERES from European Real Estate Society (ERES)

Abstract: In this paper we disentangle reservation prices of buyers and sellers for commercial real estate at the city level. To do so, we further develop and extend the cite{fisher03,fisher07} methodology to a repeat sales indexing framework. This has the advantage that it takes care of all unobserved heterogeneity, which is an important consideration in commercial real estate. Furthermore, it allows for the construction of supply and demand indexes without the need for many property characteristics or assessed values. A key innovation in our methodology, which also enables granular index production, is our use of a Bayesian, structural time series model for index estimation. By introducing these new methodological developments, we are able to estimate reliable, robust supply and demand indexes for all major metropolitan areas in the US. Here we focus on two very different urban markets: New York and Phoenix. Consistent with the notion of pro-cyclical liquidity, we find that buyers' reservation prices move much more extremely and earlier than sellers' reservation prices. Our results show that the demand indexes in both New York and Phoenix went down a full year earlier than the supply indexes during the crisis.

Keywords: Commercial Real Estate; Liquidity; Price index (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2018-01-01
New Economics Papers: this item is included in nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://eres.architexturez.net/doc/oai-eres-id-eres2018-41 (text/html)
https://eres.architexturez.net/system/files/P_20180117142954_111.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arz:wpaper:eres2018_41

Access Statistics for this paper

More papers in ERES from European Real Estate Society (ERES) Contact information at EDIRC.
Bibliographic data for series maintained by Architexturez Imprints ().