High and Low Activity Spells in Housing Markets

33 Pages Posted: 21 Dec 2015

See all articles by Eric Smith

Eric Smith

University of Essex - Department of Economics

Date Written: November 17, 2015


This paper demonstrates the way in which stock-flow matching with endogenous seller entry generates hot and cold spells in house sales. Potential sellers know the number of bidders remaining from the last house sale. If two or more bidders remain, the seller obtains the gains to trade through competitive bidding. The market is active. With one monopolistic bidder, the buyer captures the surplus and sellers become unwilling to enter. The market remains dormant until sellers think enough time has passed for buyer entry to have replenished the market and make entry profitable. The resulting pattern of trade matches up with observations from Wisconsin.

Keywords: trading volume, stock-flow matching, house price dynamics

JEL Classification: R310, D530

Suggested Citation

Smith, Eric, High and Low Activity Spells in Housing Markets (November 17, 2015). CESifo Working Paper Series No. 5601, Available at SSRN: https://ssrn.com/abstract=2706395

Eric Smith (Contact Author)

University of Essex - Department of Economics ( email )

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom

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