Estimating a housing Phillips curve: Evidence from Norway

Abstract

We examine the relationship between price changes and unsold rates in the Norwegian housing market within a Phillips curve framework. We find clear evidence of the existence of a Phillips curve in Oslo and three other Norwegian cities since price changes and unsold rates are negatively associated. There are some indications that price changes may lead the unsold rate in Oslo, although this is not consistent across the other three cities. We present a skeleton model in which house price changes may, or may not, move before the unsold rate, depending upon the appreciation rate. Data on individual sellers and buyers support the hypothesis that the propensity to hold two houses is pro-cyclical in Oslo.