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Local constant-quality housing market liquidity indices

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  • van Dijk, Dorinth W.

Abstract

Market liquidity is an important aspect of housing market developments. The time on market (TOM) of sold properties is frequently used by researchers, practitioners, and policymakers as a market liquidity indicator. Compared to research on house price indices, the literature is very sparse on constructing housing market liquidity indices. This paper proposes a new method to construct constant-quality market liquidity indices based on TOM. The first contribution is that the method improves end-of-sample reliability resulting in fewer revisions. This increases the practical usefulness for business and policy purposes. The second contribution is that the applied structural time series method is designed to work in thin markets. This allows index construction at the local level.

Suggested Citation

  • van Dijk, Dorinth W., 2024. "Local constant-quality housing market liquidity indices," Regional Science and Urban Economics, Elsevier, vol. 106(C).
    • Handle: RePEc:eee:regeco:v:106:y:2024:i:c:s0166046224000218
    DOI: 10.1016/j.regsciurbeco.2024.103997
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    More about this item

    Keywords

    Liquidity; Housing; Quality; Index; Thin markets;
    All these keywords.

    JEL classification:

    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies

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