Working Paper: NBER ID: w23449
Authors: Anthony A. Defusco; Charles G. Nathanson; Eric Zwick
Abstract: Using data on 50 million home sales from the last U.S. housing cycle, we document that much of the variation in volume came from the rise and fall in speculation. Cities with larger speculative booms have larger price booms, sharper increases in unsold listings as the market turns, and more severe busts. We present a model in which predictable price increases endogenously attract short-term buyers more than long-term buyers. Short-term buyers amplify volume by selling faster and destabilize prices through positive feedback. Our model matches key aggregate patterns, including the lead–lag price–volume relation and a sharp rise in inventories.
Keywords: Speculation; Housing Market Dynamics; Price Volume Relationship
JEL Codes: E32; G02; G12; R3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| speculative volume growth (O49) | total volume growth (O40) |
| speculative volume growth (O49) | price increase (D49) |
| speculative volume growth (O49) | unsold listings increase (L85) |
| speculative volume growth (O49) | total volume decline during bust (E32) |
| speculative booms (E32) | larger price booms (Q33) |
| speculative booms (E32) | sharper increases in unsold listings (L85) |
| speculative booms (E32) | more severe busts (E32) |
| speculative activity (D84) | cyclical nature of housing market (R31) |