Wealth Effects on the Housing Markets: Do Market Liquidity and Market States Matter?

Posted: 29 May 2013 Last revised: 26 Oct 2017

See all articles by Jhih-Hong Zeng

Jhih-Hong Zeng

Independent

Chi-Lu (Edward) Peng

Chung Hua University - Department of Finance; National Sun Yat-sen University

Ming-Chi Chen

National Sun Yat-sen University - Department of Finance

Chien-Chiang Lee

Nanchang University

Date Written: May 29, 2013

Abstract

This paper analyzes the effect of household wealth (including housing and financial wealth) on housing sales and probes their long-run and short-run dynamic relationships. We further examine the short-run effect of financial wealth on housing sales by employing quantile regressions, restricted upon different liquidity (quantile) levels and up-down housing markets, from which the differences between the early and late stages of an uptrend/downtrend can be respectively exhibited. We find that housing wealth, income, and mortgage rates have long-run influences on housing sales. Looking at the short run, we find that housing sales only respond to housing wealth and mortgage rates. When we distinguish the effects of financial wealth on housing sales in up-down housing markets, we note a positive influence of financial wealth on housing sales in down markets, but not in up markets. Particularly, our results show an impact of housing liquidity on the short-run relationships.

Keywords: wealth effect, housing sales, housing trading volume, liquidity, quantile regression

Suggested Citation

Zeng, Jhih-Hong and Peng, Chi-Lu and Chen, Ming-Chi and Lee, Chien-Chiang, Wealth Effects on the Housing Markets: Do Market Liquidity and Market States Matter? (May 29, 2013). Economic Modelling, Vol. 32, 2013, Available at SSRN: https://ssrn.com/abstract=2271455

Jhih-Hong Zeng

Independent ( email )

Chi-Lu Peng

Chung Hua University - Department of Finance ( email )

No. 707, Sec. 2, WuFu Road
Hsinchu, Taiwan 300
Taiwan

National Sun Yat-sen University ( email )

No.70, Lianhai Rd., Gushan District,
Kaohsiung City
Taiwan

Ming-Chi Chen

National Sun Yat-sen University - Department of Finance ( email )

No.70, Lianhai Rd., Gushan District,
Kaohsiung City
Taiwan

HOME PAGE: http://cm.nsysu.edu.tw/~mcchen/index.html

Chien-Chiang Lee (Contact Author)

Nanchang University ( email )

999 Xuefu Avenue
Hong Gu Tan New District
Nanchang, Jiangxi 330031
China
330031 (Fax)

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