Internet search behavior, liquidity, and prices in the housing market

We employ detailed internet search data to examine price and liquidity dynamics of the Dutch housing market. We show that the number of clicks on properties listed online proxies demand and the number of listed properties proxies supply. From this internet search behavior we create a market tightness indicator and we find that this indicator Granger causes changes in both house prices and housing market liquidity. The results of a panel VAR suggest that a demand shock results in a temporary increase in liquidity and a permanent increase in prices in urban areas. This is in accordance with search and matching models.