Search Frictions and Idiosyncratic Price Dispersion in the US Housing Market

98 Pages Posted: 16 May 2019 Last revised: 29 Feb 2020

See all articles by Nadia Kotova

Nadia Kotova

Stanford Graduate School of Business

Anthony Lee Zhang

University of Chicago - Booth School of Business

Date Written: February 27, 2020

Abstract

This paper studies idiosyncratic price dispersion in the US housing market. We develop a new strategy to measure dispersion at the level of individual house sales. We show that idiosyncratic price dispersion is countercyclical and seasonal, and is associated with various measures of market tightness. We construct a search-and-bargaining model of the housing market, and show that the relationship between seller time-on-market and price dispersion can be used to separately identify dispersion driven by seller and buyer preferences. We calibrate the model to data to quantify the magnitude of market frictions and their effects on the welfare of market participants.

Keywords: Housing, search, liquidity, price dispersion

JEL Classification: G11, G12, G14, R31

Suggested Citation

Kotova, Nadia and Zhang, Anthony Lee, Search Frictions and Idiosyncratic Price Dispersion in the US Housing Market (February 27, 2020). Available at SSRN: https://ssrn.com/abstract=3386353 or http://dx.doi.org/10.2139/ssrn.3386353

Nadia Kotova

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Anthony Lee Zhang (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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