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Abstract for:

Hot and Cold Seasons in the Housing Market

L. Rachel  Ngai,  Silvana  Tenreyro,  April 2009
Paper No' CEPDP0922: | Full paper (pdf)
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Keywords: housing market; thick-market effects, search-and-matching, seasonality, house price fluctuations

JEL Classification: E0

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This Paper is published under the following series: CEP Discussion Papers
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Abstract:

Every year during the second and thirdquarters (the “hot season”) housing markets in the UK and the US experience systematic above-trend increases in both prices and transactions. During the fourth and first quarters (the “cold season”), house prices and transactions fall below trend. We propose a search-and-matching framework that sheds new light on the mechanisms governing housing market fluctuations. The model has a “thick-market” effect that can generate substantial differences in the volume of transactions and prices across seasons, with the extent of seasonality in prices depending crucially on the bargaining power of sellers. The model can quantitatively mimic the seasonal fluctuations in transactions and prices observed in the UK and the US.