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Do Out-of-State Buyers Pay More for Real Estate? An Examination of Anchoring-Induced Bias and Search Costs

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Author Info
Val E. Lambson
Grant R. McQueen
Barrett A. Slade

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Abstract

We explore the questions of whether and why out-of-state buyers pay more for real estate than their in-state counterparts. Theoretically, we develop a model capable of explaining a premium if out-of-state buyers have high search costs, upwardly biased beliefs about prices or an unusually short time horizon to purchase. Empirically, we find that out-of-state buyers pay a statistically significant and economically meaningful premium for apartment complexes in the Phoenix area. We also find some evidence consistent with the premium being driven by high search costs, biased beliefs (anchoring) and haste associated with out-of-state buyers. Copyright 2004 by the American Real Estate and Urban Economics Association

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1080-8620.2004.00085.x
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Publisher Info
Article provided by American Real Estate and Urban Economics Association in its journal Real Estate Economics.

Volume (Year): 32 (2004)
Issue (Month): 1 (03)
Pages: 85-126
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Handle: RePEc:bla:reesec:v:32:y:2004:i:1:p:85-126

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  1. Terrence Clauretie & Paul Thistle, 2007. "The Effect of Time-on-Market and Location on Search Costs and Anchoring: The Case of Single-Family Properties," The Journal of Real Estate Finance and Economics, Springer, vol. 35(2), pages 181-196, August. [Downloadable!] (restricted)
  2. David Ling & Milena Petrova, 2008. "Avoiding Taxes at Any Cost: The Economics of Tax-Deferred Real Estate Exchanges," The Journal of Real Estate Finance and Economics, Springer, vol. 36(4), pages 367-404, May. [Downloadable!] (restricted)
  3. John D. Benjamin & Peter Chinloy & William G. Hardin III, 2007. "Institutional-Grade Properties: Performance and Ownership," Journal of Real Estate Research, American Real Estate Society, vol. 29(3), pages 219_240. [Downloadable!]
  4. Peter Colwell & Henry Munneke, 2006. "Bargaining Strength and Property Class in Office Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 33(3), pages 197-213, November. [Downloadable!] (restricted)
  5. Williamson, James M. & Brady, Mike & Durst, Ron, 2009. "The Effect of the Housing Boom on Farm Land Values via Tax-Deferred Exchanges," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49299, Agricultural and Applied Economics Association. [Downloadable!]
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This page was last updated on 2009-11-22.

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