Search and Predictability of Prices in the Housing Market

Management Science, Forthcoming

84 Pages Posted: 22 Mar 2021 Last revised: 19 May 2022

See all articles by Stig Vinther Møller

Stig Vinther Møller

Aarhus University - CREATES

Thomas Quistgaard Pedersen

Aarhus University - CREATES

Erik Christian Montes Schütte

Aarhus University; Aarhus University - CREATES; DFI

Allan Timmermann

UCSD ; Centre for Economic Policy Research (CEPR)

Date Written: February 26, 2021

Abstract

We develop a new housing search index (HSI) extracted from online search activity on a limited
set of keywords related to the house buying process. We show that the HSI has strong predictive
power over subsequent changes in house prices, both in-sample and out-of-sample and after
controlling for the effect of commonly used predictors, and relate our findings to models of
search-induced frictions. Our results imply that search data can be used as an early indicator
of where the market is going.

Keywords: Internet search, housing markets, housing demand, forecasting, frictions, inelastic housing supply.

JEL Classification: C10, E17, G10, R3

Suggested Citation

Møller, Stig Vinther and Pedersen, Thomas Quistgaard and Schütte, Erik Christian Montes and Schütte, Erik Christian Montes and Timmermann, Allan, Search and Predictability of Prices in the Housing Market (February 26, 2021). Management Science, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3793774 or http://dx.doi.org/10.2139/ssrn.3793774

Stig Vinther Møller

Aarhus University - CREATES ( email )

Nordre Ringgade 1
Aarhus, DK-8000
Denmark

Thomas Quistgaard Pedersen

Aarhus University - CREATES ( email )

School of Economics and Management
Building 1322, Bartholins Alle 10
DK-8000 Aarhus C
Denmark

Erik Christian Montes Schütte (Contact Author)

Aarhus University ( email )

Nordre Ringgade 1
DK-8000 Aarhus C, 8000
Denmark

Aarhus University - CREATES ( email )

School of Economics and Management
Building 1322, Bartholins Alle 10
DK-8000 Aarhus C
Denmark

HOME PAGE: http://sites.google.com/view/christian-montes-schutte/home

DFI ( email )

Allan Timmermann

UCSD ( email )

9500 Gilman Drive
La Jolla, CA 92093-0553
United States
858-534-0894 (Phone)

HOME PAGE: http://rady.ucsd.edu/people/faculty/timmermann/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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