The Geography of Housing Market Liquidity During the Great Recession

Abstract

The historic deterioration of housing markets during the Great Recession was characterized by plummeting home values and skyrocketing foreclosure rates. Although almost no place in the Unites States escaped unscathed, significant heterogeneity emerged across both time and space with regard to the housing market collapse. An important aspect missing in many theoretical and empirical studies of this episode is the role of liquidity in local housing markets as manifested in homes taking longer to sell. Examining the dynamics of ZIP-code-level data reveals that the severity, timing, and length of the Great Recession varied across regions and is linked to housing liquidity. Throughout this article, our main measure of housing liquidity is time on the market (TOM), the Using detailed micro data at the ZIP code level, this article explores the regional variation in housing market performance to account for the severity of the Great Recession. The granularity of the data, relative to a more traditional analysis at the county level, is useful for evaluating the performance of the housing market because credit and local macroeconomic variables are tied to housing valuations. The deterioration of the ability to transact (buy and sell) housing units, often referred to as housing liquidity, is an important link that connects housing outcomes with real and credit variables. The data indicate that the timing, severity, and duration of the recession varied across regions and was closely connected with the behavior of the housing market. The deterioration in housing liquidity was uniform across all house price tiers (i.e., bottom, middle, and upper end). Furthermore, there was correlation across areas between the magnitude of the declines in housing liquidity and the severity of the deterioration in house prices and macroeconomic conditions.

Credit Policy and Housing Market Liquidity: An Empirical Study in Beijing Based on the TVP-VAR Model

“…For example, the liquidity of older houses with old structures, superior geographic locations, and high land premium is generally lower than the average market liquidity [24] . The air, noise and other pollution in the neighborhood or major public incidents nearby will not only reduce the housing prices but also slow down the speed of transactions [25,26] ; The building technologies adopted [27] , the available public services [28] , and the surrounding industrial types [29] also affect the transaction process. From the macro perspective, fluctuations in housing liquidity are related to economic conditions [30] and are co-moving with credit policies.…”