Fear and Loathing in the Housing Market: Evidence from Search Query Data

We use Google search query data to develop a novel and direct index of investor distress in the housing market. This measure is highly correlated with negative housing sentiment. We nd that our Housing Distress Index (HDI) is contemporaneously related to and predicts national housing returns, the VIX index, foreclosures, and returns on ABX subprime mortgage credit default swaps. The Housing Distress Index also predicts housing returns among a cross-section of cities. Results further indicate that the relationship between the HDI and national housing returns is asymmetric and stronger during times of market crisis. Overall, the relationship between the HDI and housing returns resembles that between the VIX and stock returns.