The Ins and Outs of Selling Houses: Understanding Housing Market Volatility

L. Rachel Ngai and Kevin Sheedy

No 14331, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper documents the cyclical properties of housing-market variables, which are shown to be volatile, persistent, and highly correlated with each other. Is the observed volatility in these variables due to changes in the speed at which houses are sold or changes in the number of houses that are put up for sale? An inflow-outflow decomposition shows that the inflow rate accounts for almost all of the fluctuations in sales volume. The paper then shows that a search-and-matching model with endogenous moving subject to housing demand shocks performs well in explaining fluctuations in housing-market variables. A housing demand shock induces more moving and increases the supply of houses on the market, thus one housing demand shock replicates three correlated reduced-form shocks that would be needed to match the relative volatilities and correlations among key housing-market variables.

Keywords: Housing market volatility; Search frictions; Inflow-outflow decomposition; Endogenous moving (search for similar items in EconPapers)
Date: 2020-01
New Economics Papers: this item is included in nep-dge, nep-rmg and nep-ure
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Related works:
Journal Article: THE INS AND OUTS OF SELLING HOUSES: UNDERSTANDING HOUSING‐MARKET VOLATILITY (2024)
Working Paper: The ins and outs of selling houses: understanding housing-market volatility (2024)
Working Paper: The Ins and Outs of Selling Houses: Understanding Housing-Market Volatility (2023)
Working Paper: The Ins and Outs of Selling Houses: Understanding Housing-Market Volatility (2022)
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