The Pearls and Perils of Google Trends: A Housing Market Application

This study aims at providing insights into the correct usage of Google search data, which are available through Google Trends. The focus is on the effect of sampling errors, which has not received the attention that it deserves. A housing market application is used to demonstrate the effects. For this purpose, the relationship between online search activity for mortgages and real housing market activity is investigated. A simple time series model, which explains transactions by an online mortgage search, is estimated. The results show that the effect of sampling errors is substantial. Thus, although the application of Google Trends data in research remains promising, far more attention should be given to the limitations of these data.