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  5. Housing Transaction Dynamics
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Housing Transaction Dynamics

Paper Session

Friday, Jan. 5, 2024 10:15 AM - 12:15 PM (CST)

Marriott Rivercenter, Conference Room 10
Hosted By: American Real Estate and Urban Economics Association
  • Chair: Paul E. Carrillo, George Washington University

House Relistings and Search Theory

Darren K. Hayunga
,
University of Georgia
William Swymer
,
University of Georgia

Abstract

This study investigates the impact relistings have on the transaction prices and marketing durations of single-family homes. First listings do not always result in completed transactions and relistings have largely been ignored in the housing literature. As can be expected, relisted homes exhibit substantial increases in marketing times. We find this trait yields higher prices as shown by search theory. Upon rigorously controlling for the longer marketing durations, the results indicate that relistings experience transaction prices similar to single-listing sales. Our study demonstrates the criticality of including marketing durations in house price equations and vice versa.

Loss Aversion and Focal Point Bias: Empirical Evidence

Stephen Ross
,
University of Connecticut and NBER
Tingyu Zhou
,
Florida State University

Abstract

We test whether loss aversion is higher among individuals for whom we observe focal point

tendencies in two contexts: experimental data containing a direct measure of loss aversion among consumers, and housing sales prices allowing for high-stake impacts of loss aversion. We find a strong positive relationship between experimentally measured loss aversion and responding with round numbers. Similarly, the effects of facing a loss on the eventual sales price are larger for home sellers who selected a round mortgage amount during their initial purchase. Further, we show that selecting round mortgage amounts is persistent within borrowers over time.

Do Rounding-Off Heuristics Matter? Evidence from Bilateral Bargaining in the U.S. Housing Market

Haaris Mateen
,
University of Houston
Franklin Qian
,
University of North Carolina-Chapel Hill
Ye Zhang
,
Stockholm School of Economics
Tianxiang Zheng
,
University College London

Abstract

Using confidential offer-level data on the US housing market, this paper examines rounding-off heuristics in the housing bilateral bargaining process. We find that home sellers and home buyers follow different rounding-off heuristics. Sellers' list prices cluster more frequently on "charm'' numbers (e.g. 349,999), compared to buyers' offer prices and negotiated final sales prices; the latter two cluster more frequently on round numbers. The choice of heuristics has important consequences for housing transaction outcomes. Round list prices yield lower sales prices compared to non-round prices without generating a shorter time on the market. Excluding trivial adjustments, buyer counteroffers are more aggressive with round list prices --- there is a greater price adjustment, positive or negative, in the offer submitted compared to the list price. Round list prices also attract a greater number of buyers participating in the buying process. Our empirical findings best support a mechanism where round prices are weak anchors for buyers' valuation compared to non-round list prices, thereby allowing the possibility of some sellers strategically choosing round prices to induce bidding wars.

Deal or No Deal? The Time-on-Market, Time-to-Close, and Residential Transaction Prices

Marc Francke
,
University of Amsterdam
Martijn Droes
,
University of Amsterdam
Yumei Wang
,
University of Amsterdam

Abstract

Unlike many other major asset classes, when purchasing a property, a lot of time can pass between the date of purchase and the date when ownership is formally transferred from the seller to the buyer. Using detailed housing transactions data from the Netherlands, we find that this period, the time-to-close, has a positive effect on transaction prices. These results are in line with a micro-economic bargaining model in which the seller wants to be compensated by the buyer for the additional costs associated with a longer time-to-close. Further results show that ignoring the time-to-close leads to estimation bias in the effect of time-on-market on transaction prices.

Discussant(s)
Patrick Smith
,
University of North Carolina-Charlotte
Antonio Gargano
,
University of Houston
Tanner Regan
,
George Washington University
Alina Arefeva
,
University of Wisconsin-Madison
JEL Classifications
  • R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location
  • R2 - Household Analysis