Theoretical Models on Distinguishing Market Conditions

Paul Anglin and Yanmin Gao

ERES from European Real Estate Society (ERES)

Abstract: We offer two perspectives on using evidence to distinguish a “buyers’ market” from a “sellers’ market” from “balanced” market conditions in a real estate market. The first perspective recognizes the effects of randomness and studies how to weigh multiple indicators of market conditions when estimating the hidden state of the market. We derive optimal weights based on the sensitivity and the noisiness of each indicator. Numerical simulations suggest the magnitude of the benefits associated with optimal weighting. Our second perspective emphasizes that the current state of the market depends on lagged indicators. Using the case of two indicators, we characterize the time path jointly and discuss the short term and medium term properties of the solution. In particular, those properties help when trying to understand how long unbalanced market conditions would persist. These two perspectives enable us to discuss specific examples which illustrate why the definition of, say, a sellers’ market can be confusing. We suggest that the use of a likelihood ratio may help.

Keywords: indicators of market conditions; price trends; transitional dynamics; weighted average (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2025-01-01
References: Add references at CitEc
Citations:

Downloads: (external link)
https://eres.architexturez.net/doc/oai-eres-id-eres2025-72 (text/html)
https://architexturez.net/system/files/eres2025_72 ... 50113182002_5964.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden

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:eres2025_72

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 ().