Housing Market Liquidity

We propose a new measure of the liquidity of the U.S. housing market, based on transaction-level data from a major online real estate marketplace. Housing market liquidity is distinct from house price levels and has improved considerably after the recent financial crisis. We uncover a strong common factor in regional housing market liquidity, but also some distinct region-specific dynamics. At the national level, house price levels and mortgage rates predict liquidity. At the state-level, liquidity predicts house prices and economic activity. Our results are supportive of the theoretical predictions of Stein (1995) and Amihud and Mendelson (1986). We also analyze spillover effects of liquidity and house prices across neighboring counties.