Internet Word Searches Suggest Trends in Demand for Housing, Say Cleveland Fed Researchers

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Using the volume of internet word searches to examine trends in the demand for housing, Federal Reserve Bank of Cleveland researchers find that home prices may be currently overvalued. Internet search data also suggests a possible decline in first-time home buyers.

Internet searches for the terms “first home” and “mortgage calculator” are currently much lower than they were before the financial crisis, suggesting a possible decline in first-time home buyers.

Data on the volume of internet searches done on particular words and phrases can provide some insights into the demand for housing, say Federal Reserve Bank of Cleveland researchers Rawley Heimer, Daniel Kolliner, and Timothy Stehulak.

The researchers find that, over a ten-year period, the search volume for the term “real estate agent” moves closely with the Case-Shiller Home Price Index. Although both have been trending upward, the researchers say growth in demand, as indicated by search volumes, has been lagging behind the Case-Shiller index, which may imply that home prices are currently overvalued.

Search volume for “real estate agent” also closely tracks another traditional measure of demand, home sales, as well as search volume for the term “mortgage broker.” The researchers say a drop in searches for “mortgage broker” following the recession could indicate that income-constrained home buyers, who are more likely to use a mortgage broker, are going to constitute a smaller fraction of home sales going forward.

And searches for the terms “first home” and “mortgage calculator” are currently much lower than they were before the financial crisis, suggesting a possible decline in first-time home buyers.

Read Uncovering the Demand for Housing Using Internet Search Volume

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