The Short and the Long of It: Stock-Flow Matching in the US Housing Market
October 20, 2022
Summary
In 2004 and 2005, US house prices and sales surged. In 2006, a sharp, dramatic downturn triggered the onset of the Great Recession. The authors of this working paper assess how well the stock-flow matching framework explains the housing market performance during this time.
View PaperWorking Paper 2022-15
Abstract: This paper investigates the US housing market from just before the Great Recession onward (2006–19) and assesses the viability of stock-flow matching in generating the observed outcomes. The paper documents that the probability that a house sells declines sharply after listing for two weeks. Moreover, the probability and associated price of a fast sale recover from the housing slump sooner, faster, and more prominently than slower sales. The simulated stock-flow matching model can mimic not only sales, prices, listings, and time-on-market but also capture the distinctions in quick and slower trades, indicating the importance of stock-flow matching for understanding housing market dynamics.
JEL classification: E30, R21, R31
Key words: housing, stock-flow matching, trading dynamics, duration dependence
Digital Object Identifier: https://doi.org/10.29338/wp2022-15
First draft: October 2022. The views expressed here are those of the authors and not necessarily those of the Federal Reserve Bank of Atlanta, the Federal Reserve System, the International Bank for Reconstruction and Development/World Bank, or its executive directors. Smith acknowledges the support of the Business and Local Government Data Research Centre (grant number ES/L011859/1), funded by the Economic and Social Research Council, for undertaking this work. The authors would like to gratefully acknowledge early contributions to the project from Yunjuan Liu. Any remaining errors are the authors' responsibility.
Please address questions regarding content to Eric Smith, University of Essex; Zoe Xie, World Bank; or Lei Fang, Federal Reserve Bank of Atlanta.
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