Persistence of market conditions in real estate markets

Paul Anglin and Yanmin Gao

ERES from European Real Estate Society (ERES)

Abstract: We show how using commonly reported measures of real estate market conditions can improve the accuracy of price predictions. The standard model of competitive markets asserts that excess demand causes price(s) to adjust to an equilibrium with little delay. In an illiquid market, such as the market for real estate, attaining an equilibrium may take significantly more time. That fact implies that data on market conditions would be informative. A better understanding of the adjustment process in a real estate market could also lead to buying or selling strategies which are better informed.This paper has two parts. The first part uses different types of models to focus on the conceptual distinction between an exogenous variable and an endogenous variable. Based on this distinction, we offer six hypotheses on why the effects of marketconditions might differ between cities. The second part uses vector auto-regression to study the persistence of several variables, with a particular focus on an inflation-adjusted price index and two popular measures of excess demand (the ratio of sales to new listings and “Months of Inventory”). Using monthly data on residential real estate markets in 31 Canadian cities, we find that excess demand affects prices contemporaneously, that changes in measured excess demand persist for a significant period of time and that they affect prices with a lag. We also find evidence of a statistically significant feedback effect, in some cities, from changes in prices to the measures of excess demand.

Keywords: market conditions; Months of Inventory; price trends; Sales to New Listings Ratio (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2025-01-01
New Economics Papers: this item is included in nep-ure
References: Add references at CitEc
Citations:

Downloads: (external link)
https://eres.architexturez.net/doc/oai-eres-id-eres2025-73 (text/html)
https://architexturez.net/system/files/eres2025_73 ... 50113182741_7764.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_73

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 ().