Fluctuations of the Chinese real estate market: Price stickiness and non-equilibrium

Price stickiness is a problem faced by macro controlling and policy making, also is the core idea of the neo-Keynesians and emerging neo-classical scholars. The research on the sticky price of Chinese real estate market has positive policy implications. We use 22 big and medium cities monthly housing price data in China from Jan.2006 to Nov.2012. We research from multiple perspectives of price fluctuation frequency, amplitudes, tendencies and pricing pattern. We find that the eastern cities get a lower price adjustment frequency and show strong price rigidity, but at the same time, 1-month and 12-month results show that the amplitudes of eastern cities are lager than that of central and western cities. We decompose the housing price into state-dependent and time-dependent parts and find a significant non-equilibrium characteristic of price fluctuations. First, when the price goes up, it behaves more like a monopoly seller market and tends to be price-determined pricing pattern, however, It show competitive market pricing pattern when in the contraction market condition; Second, the state-dependent coefficients of eastern cities are larger indicating that the eastern cities get higher market-oriented degree of real estate market, the price fluctuations are determined more by market factors.