The Thick Market Effect on Housing Markets Transactions
NBER Working Paper No. 12134
This paper provides a search model for housing market where the number of buyers and/or sellers plays very important role. The model makes three testable predictions: (1) the unemployment rate has a negative impact on the trading volume and the sale prices of the housing market; (2) a larger housing market has a lower average sale price, shorter time-to-sale and smaller price dispersion, in addition to a lower vacancy rate. (3) In a larger housing market, when the unemployment rate goes up (or down), the sale price decreases (or increases) by a smaller percentage than in a smaller market. All three predictions are supported by a panel dataset of the Texas city-level housing markets.
Published: Gan, Li and Qinghua Zhang. “The Thick Market Effect of Local Unemployment Rate Fluctuations.” Journal of Econometrics 133(2006): 127-152.