Abstract
I propose a novel channel for the emergence of spatial correlation in housing market liquidity. Using micro-level panel data on both actual transactions and household valuations of their own non-traded properties, I find that market thinness and perceived house price growth rates are strongly linked across neighbouring areas, consistent with a framework in which spillovers arise through spatial learning. The mechanisms have the potential to explain the regional clustering of house prices, feedback effects, and the aggregate transmission of shocks from narrow segments of the market.
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