Empirical evidence on the reaction speeds of housing prices and sales to demand shocks |
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Authors: | Elias Oikarinen |
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Affiliation: | 1. Federal Reserve Bank of San Francisco, United States;2. Department of Economics, University of California, Davis, United States;3. Department of Economics, University of Bonn, Germany;4. CEPR, United Kingdom;5. Graduate School of Management, University of California, Davis, United States;6. NBER, United States |
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Abstract: | This article studies the co-movement and dynamics between price movements and transactions in the housing market using data for the period 1988–2008 from Finland. While the previous related literature examines the reactions of sales and prices to an interest rate shock only, this study investigates the responses to income and debt shocks as well. The empirical estimations show that the response of prices to demand shocks is substantially slower than that of sales. The estimated reactions of sales substantially differ from those reported in the earlier literature. The reaction patterns can create the kind of strong positive co-movement between price movements and sales volume and the kind of negative correlation between price level and sales that have been found in several housing markets. |
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