Wednesday, March 26, 2014

Predicting China's Real Estate Market Dynamics Using Internet Search Activity

Google has been good for me.  It has allowed me to efficiently search for stuff that interests me and it has allowed me to write several economics research papers.  People have been interested in my past work on Google Searches as a tool to learn about interest in climate change.   Now you can read a draft of my new Internet paper focused on China's housing markets and what is revealed by Chinese households' Internet searches related to their markets.  Here is our paper's title and abstract.

Internet Search Activity as Social Learning: Evidence from China's Housing Market Dynamics
Siqi Zheng
Tsinghua University
Weizeng Sun
Tsinghua University
Matthew E. Kahn*

March 25th 2014


Over the last decade, China’s home prices have soared.  Young people, especially young men, continue to want to buy homes and must choose whether and when and where to buy.  Due to fundamental uncertainty about one’s labor income path, future real estate price growth and government policy, potential real estate buyers have an incentive to seek out Internet information about evolving market sentiment.  Following a recent U.S literature, we build a 35 Chinese city real estate sentiment index that measures the degree of optimism in a local market at a point in time.  All else equal, this index predicts several important real estate phenomena and its effects differ depending on local demand side and supply side conditions.  Our findings suggest that this sentiment index proxies for a time varying housing demand shifter.  We use a household expectations survey covering seven cities to further explore the underpinnings of the empirical relationships we document.