The Dynamics of Housing Prices

32 Pages Posted: 11 Jan 2013

See all articles by Sheridan Titman

Sheridan Titman

University of Texas at Austin - Department of Finance; National Bureau of Economic Research (NBER)

Ko Wang

CUNY Baruch College

Jing Yang

California State University, Fullerton - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: January 10, 2013

Abstract

We present a simple model of the price process of a capital asset that is subject to serially correlated demand shocks, and whose supply responds with a lag. In this setting the price of the asset can exhibit positive serial correlation over short intervals and negative serial correlation over longer intervals. In an examination of the prices of owner-occupied housing in 97 metropolitan areas between 1980 and 2008, we find that price changes exhibit positive serial correlation at the one year interval, with subsequent reversals of price changes over longer intervals. In addition, consistent with the model, our tests indicate that the price process is influenced by proxies for the serial correlation in demand as well as the elasticity of the supply responses.

Keywords: Housing price, Serial correlation, Rigid supply

JEL Classification: G10, R21, R30 , R31

Suggested Citation

Titman, Sheridan and Wang, Ko and Yang, Jing, The Dynamics of Housing Prices (January 10, 2013). Available at SSRN: https://ssrn.com/abstract=2199115 or http://dx.doi.org/10.2139/ssrn.2199115

Sheridan Titman (Contact Author)

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-232-2787 (Phone)
512-471-5073 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ko Wang

CUNY Baruch College ( email )

17 Lexington Avenue
New York, NY 10021
United States

Jing Yang

California State University, Fullerton - Department of Finance ( email )

PO Box 34080
Fullerton, CA 92834-9480
United States

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