Search and Predictability of Prices in the Housing Market

63 Pages Posted: 22 Mar 2021 Last revised: 24 Jun 2021

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 - CREATES; DFI

Allan Timmermann

UCSD ; Centre for Economic Policy Research (CEPR)

Date Written: February 26, 2021

Abstract

We develop a new housing seach index (HSI) extracted from online search activity on a limited set of keywords related to the house buying process. We show that HSI has strong predictive power for subsequent changes in house prices, both in-sample and out-of-sample, and after controlling for the effect of commonly used predictors. Compared to the stock market, online search has much stronger predictive power over house prices and its effect also lasts longer. Variation in housing search is a particularly strong predictor of subsequent price changes in markets with inelastic housing supply and high speculation.

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

JEL Classification: C10, E17, G10, R3

Suggested Citation

Møller, Stig Vinther and Pedersen, Thomas Quistgaard and Schütte, Erik Christian Montes and Timmermann, Allan, Search and Predictability of Prices in the Housing Market (February 26, 2021). 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 - CREATES ( email )

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

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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