While the hedonic property value model and recently developed computable general equilibrium urban models assume the housing market is in equilibrium, recent years have witnessed extreme circumstances such as large changes in housing prices, high levels of mortgage default, and high levels of foreclosure that bring into question this assumption. This highlights the need for a better understanding of the dynamics of the housing market and the mechanisms that drive and sustain periods of disequilibrium. In this analysis, I develop a dynamic model of the housing market where vacancies naturally arise as the error correction mechanism. I estimate this model using annual U.S. panel data at the MSA level for 1990–2011. The results show that when there is excess demand, prices rise when vacancies fall but prices do not fall when there is excess supply and vacancies rise. This is consistent with the belief that prices are sticky downwards and hence prolong housing downturns. On the other hand, when there is excess supply, there is a relatively stronger decline in new housing in response to a rise in vacancies and much less of a new housing reaction when there is excess demand and vacancies fall. Furthermore, when I allow for a structural shift in the housing market brought on by the Great Recession (2006–2011), I find that the housing market became more responsive on both sides – excess supply and demand – during this period.
The Journal of Real Estate Finance and Economics – Springer Journals
Published: May 22, 2014
It’s your single place to instantly
discover and read the research
that matters to you.
Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.
All for just $49/month
Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly
Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.
Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.
Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.
All the latest content is available, no embargo periods.
“Hi guys, I cannot tell you how much I love this resource. Incredible. I really believe you've hit the nail on the head with this site in regards to solving the research-purchase issue.”Daniel C.
“Whoa! It’s like Spotify but for academic articles.”@Phil_Robichaud
“I must say, @deepdyve is a fabulous solution to the independent researcher's problem of #access to #information.”@deepthiw
“My last article couldn't be possible without the platform @deepdyve that makes journal papers cheaper.”@JoseServera