The Diffusive Nature of Housing Prices

Antoine-Cyrus Becharat, Michael Benzaquen and Jean-Philippe Bouchaud

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Abstract: We analyze the French housing market prices in the period 1970-2022, with high-resolution data from 2018 to 2022. The spatial correlation of the observed price field exhibits logarithmic decay characteristic of the two-dimensional random diffusion equation -- local interactions may create long-range correlations. We introduce a stylized model, used in the past to model spatial regularities in voting patterns, that accounts for both spatial and temporal correlations with reasonable values of parameters. Our analysis reveals that price shocks are persistent in time and their amplitude is strongly heterogeneous in space. Our study confirms and quantifies the diffusive nature of housing prices that was anticipated long ago (Clapp et al. 1994, Pollakowski et al. 1997), albeit on much restricted, local data sets.

Date: 2024-12, Revised 2025-03
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