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Anticipated vs. unanticipated house price movements and transaction volume

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  • Arslan, Yavuz
  • Kanık, Birol
  • Köksal, Bülent

Abstract

Using data from England and Wales, we analyze the relationship between house prices and transaction volume (number of houses sold) and find that there is a negative relationship. When we decompose price changes into anticipated and unanticipated components we find that while anticipated house price changes positively affect transaction volume, unanticipated price changes have a negative effect. These findings give insights for the theories which try to explain the relationship between house prices and transaction volume. Our findings are inconsistent with the “down-payment effect” approach developed by Stein (1995) and Ortalo-Magne and Rady (2006), and with the “loss aversion behavior” approach discussed by Genesove and Mayer (2001). However, our results support the evidence of asymmetric decisions on the buyer and seller side documented in Case and Shiller (1988) and partially support the mechanisms in search and matching models.

Suggested Citation

  • Arslan, Yavuz & Kanık, Birol & Köksal, Bülent, 2015. "Anticipated vs. unanticipated house price movements and transaction volume," Journal of Housing Economics, Elsevier, vol. 28(C), pages 121-129.
    • Handle: RePEc:eee:jhouse:v:28:y:2015:i:c:p:121-129
    DOI: 10.1016/j.jhe.2015.04.003
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    1. Mark Andrew & Geoffrey Meen, 2003. "House Price Appreciation, Transactions and Structural Change in the British Housing Market: A Macroeconomic Perspective," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 31(1), pages 99-116, March.
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    Cited by:

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    3. Doszyń Mariusz & Gnat Sebastian, 2017. "Econometric Identification of the Impact of Real Estate Characteristics Based on Predictive and Studentized Residuals," Real Estate Management and Valuation, Sciendo, vol. 25(1), pages 84-92, March.

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    More about this item

    Keywords

    Expectations; Transaction volume; House prices;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • G1 - Financial Economics - - General Financial Markets
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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