“Fire Sales” in Housing Market: Is the House- Search Process Similar to a Theme Park Visit?
Author
Year
Volume
Issue Number
Start Page / End Page
Charles Ka Yui Leung, Jun Zhang
2011
14
3
311 / 329
Abstract
Three striking empirical regularities have been repeatedly reported: the positive correlation between housing prices and trading volume, and between housing price and time-on-the-market (TOM), and the existence of price dispersion. This short paper provides perhaps the first unifying framework which mimics these phenomena in a simple competitive search framework. In the equilibrium, sellers with heterogeneous waiting costs and buyers are endogenously segregated into different submarkets, each with distinct market tightness and prices. With endogenous search efforts, our model also reproduces the well-documented price-volume correlation. Directions for future research are also discussed.
Keywords
Housing market; Competitive search; Price dispersion; Trading volume; Time on the market