Hot and Cold Seasons in the Housing Market

42 Pages Posted: 16 Apr 2013

See all articles by Rachel Ngai

Rachel Ngai

London School of Economics & Political Science (LSE) - Department of Economics; Hong Kong University of Science & Technology (HKUST) - HKUST School of Business and Management

Silvana Tenreyro

London School of Economics (LSE)

Date Written: April 2013

Abstract

Every year housing markets in the United Kingdom and the United States experience systematic above-trend increases in both prices and transactions during the second and third quarters (the "hot season") and below-trend falls during the fourth and first quarters (the "cold season"). House price seasonality poses a challenge to existing models of the housing market. To explain seasonal patterns, this paper develops a matching model that emphasizes the role of match-specific quality between the buyer and the house and the presence of thick-market effects in housing markets. It shows that a small, deterministic driver of seasonality can be amplified and revealed as deterministic seasonality in transactions and prices, quantitatively mimicking the seasonal fluctuations in transactions and prices observed in the United Kingdom and the United States.

Keywords: house price fluctuations, housing market, match quality, search-and-matching, seasonality, thick-market effects

JEL Classification: R3

Suggested Citation

Ngai, Liwa Rachel and Tenreyro, Silvana, Hot and Cold Seasons in the Housing Market (April 2013). CEPR Discussion Paper No. DP9427. Available at SSRN: https://ssrn.com/abstract=2251708

Liwa Rachel Ngai (Contact Author)

London School of Economics & Political Science (LSE) - Department of Economics ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44 207 955 7017 (Phone)
+44 207 831 1840 (Fax)

Hong Kong University of Science & Technology (HKUST) - HKUST School of Business and Management ( email )

Clear Water Bay
Kowloon
Hong Kong

Silvana Tenreyro

London School of Economics (LSE) ( email )

Houghton Street
London WC2A 2AE
United Kingdom

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