Price and Transaction Volume in the Dutch Housing Market

Tinbergen Institute Discussion Paper No. 2010-039/2

56 Pages Posted: 15 Apr 2010

See all articles by Erik R. de Wit

Erik R. de Wit

University of Amsterdam - Finance Group; Tinbergen Institute

Peter Englund

Swedish House of Finance

Marc Francke

University of Amsterdam - Faculty of Economics and Business (FEB); Ortec Finance

Date Written: April 14, 2010

Abstract

Housing markets typically exhibit a strong positive correlation between the rate of price increase and the number of houses sold. We document this correlation on high-quality Dutch data for the period 1985-2007, and estimate a VEC-model that allows us to study the mechanism giving rise to the correlation. The data identify the flows of new houses offered for sale as well as the number of houses sold. According to the estimated model, shocks to market fundamentals (the mortgage rate)have an immediate and significant impact on the rate of sale, little impact on the rate of entry of new houses for sale, and a gradual impact on the house prices. This pattern is consistent with a search model where buyers and sellers gradually learn about changes in market conditions.

Keywords: Price-Volume Correlation, Time-on-the-Market, Vector Error Correction Model

JEL Classification: G12, G21, E29, G17

Suggested Citation

de Wit, Erik R. and Englund, Peter and Francke, Marc, Price and Transaction Volume in the Dutch Housing Market (April 14, 2010). Tinbergen Institute Discussion Paper No. 2010-039/2. Available at SSRN: https://ssrn.com/abstract=1589296 or http://dx.doi.org/10.2139/ssrn.1589296

Erik R. De Wit (Contact Author)

University of Amsterdam - Finance Group ( email )

Roetersstraat 11
1018 WB Amsterdam
Netherlands
+31205255414 (Phone)
+31205255285 (Fax)

HOME PAGE: http://www.abs.uva.nl/pp/edewit

Tinbergen Institute

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

HOME PAGE: http://www.tinbergen.nl

Peter Englund

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

Marc Francke

University of Amsterdam - Faculty of Economics and Business (FEB) ( email )

Plantage Muidergracht 12
Amsterdam, 1018 TV
Netherlands

HOME PAGE: http://www.uva.nl/en/contact/staff/item/m.k.francke.html?f=francke

Ortec Finance ( email )

Orly Centre
Barajasweg 10
Amsterdam, 1043 CP
Netherlands
+ 31 20 7009 700 (Phone)
+ 31 20 7009 701 (Fax)

HOME PAGE: http://www.ortec-finance.com

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