Does News Affect the Housing Market
Year: 2016
Type: preprint
Abstract: This paper investigates the impacts of sentiment and consumer expectations in Seoul's housing market dynamics. Korea's housing market can be characterized by its triplet structure, made up of sale, Jeonse and monthly rent. Jeonse is essentially a repurchase agreement where the owner borrows from the tenant, with the house as collateral. As Jeonse is the most dominant type of rental contract in Korea, making up more than 97 percent of total Korean housing rental contracts, it is worth analyzing the determinants of price and transaction quantity in the Jeonse market as well as in the sale market. Using the sentiment reflected in news articles as a proxy for expectations, we uncover that market sentiment plays an important role in driving the price and quantity of Seoul's housing market. Our unique database consists of micro-level housing market transaction data, text-mining data obtained from news articles, and various macroeconomic indicators from January 2009 to December 2013. Since Seoul is composed of 25 regional districts called 'gu', we use panel regression models for 25 gus and 60 months to empirically identify the determining factors of four dependent variables -- housing price, housing transaction volume, Jeonse price and Jeonse transaction volume -- which are representative of Seoul's housing market conditions. Our results imply that, in addition to macroeconomic variables that have been identified as the main drivers of housing market dynamics, the frequency of certain topics mentioned in newspaper articles, and the positive or negative tone of the article have significant impacts on Seoul's housing market.
Source: SSRN Electronic Journal
Institution: Korea Advanced Institute of Science and Technology
Language: English
Topic: Housing Market and Economics
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2310149695