Here Lives a Wealthy Man: Price Rigidity and Predictability in Luxury Housing Markets

76 Pages Posted: 17 Mar 2018

See all articles by Daniel Levy

Daniel Levy

Bar-Ilan University - Department of Economics; Emory University - Department of Economics; Rimini Center for Economic Analysis

Avichai Snir

Bar Ilan University - Department of Economics

Date Written: February 20, 2018

Abstract

We use novel and unique data to study the effect of price changes in the market for luxury and middle class homes. We find that luxury home sales respond less to price changes than the middle-class home sales; in the market for luxury homes, past prices affect current prices; luxury home prices persist; and prices of luxury homes are stickier than prices of middle-class homes. Recent macroeconomic models predict that housing markets can have counter-cyclical effect, if home prices are flexible. Our findings imply that home prices, especially luxury home prices, may not be flexible enough to generate such effect.

Keywords: Housing Market, Luxury Housing, Housing Demand, Price Rigidity, Sticky Prices, Predictability, Veblen Effect

JEL Classification: E31, E32, R21, G14, D12

Suggested Citation

Levy, Daniel and Snir, Avichai, Here Lives a Wealthy Man: Price Rigidity and Predictability in Luxury Housing Markets (February 20, 2018). Available at SSRN: https://ssrn.com/abstract=3142656 or http://dx.doi.org/10.2139/ssrn.3142656

Daniel Levy (Contact Author)

Bar-Ilan University - Department of Economics ( email )

Ramat-Gan, 5290002
Israel
+972 3 531-8345 (Phone)
+972 3 738-4034 (Fax)

HOME PAGE: http://econ.biu.ac.il/en/levy

Emory University - Department of Economics ( email )

1602 Fishburne Drive, Suite 306
Rich Building
Atlanta, GA 30322-0001
United States

HOME PAGE: http://economics.emory.edu/home/people/faculty/Levydaniel.html

Rimini Center for Economic Analysis ( email )

Wilfrid Laurier University
75 University Ave W.
Waterloo, Ontario N2L3C5
Canada

HOME PAGE: http://rcea.org/

Avichai Snir

Bar Ilan University - Department of Economics ( email )

Ramat-Gan, 52900
Israel
+972 3 736 0835 (Phone)
+972 3 535 3180 (Fax)

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