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Housing prices and the optimal time-on-the-market decision

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Author Info

  • İnaltekin, Hazer
  • Jarrow, Robert A.
  • Sağlam, Mehmet
  • Yıldırım, Yıldıray

Abstract

This paper provides a model for housing prices based on a seller solving the optimal time-on-the market problem. Given the seller’s optimal time-on-the market, analytical expressions are provided for both the expected time-on-the-market and the sales price. These expressions facilitate the computation of comparative statics. Consistent with economic intuition, we show that (i) both the expected time-on-the market and sales price decrease as interest rates increase, (ii) the expected time-on-the market increases and the expected sales price decreases as offer activity declines, and (iii) the expected time-on-the market and expected sales price both increase as the list price increases.

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File URL: http://www.sciencedirect.com/science/article/pii/S1544612311000298
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Bibliographic Info

Article provided by Elsevier in its journal Finance Research Letters.

Volume (Year): 8 (2011)
Issue (Month): 4 ()
Pages: 171-179

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Handle: RePEc:eee:finlet:v:8:y:2011:i:4:p:171-179

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Web page: http://www.elsevier.com/locate/frl

Related research

Keywords: Real estate; Sale price; Time-on-the-market; Optimal waiting time;

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References

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  1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877.
  2. Daniel P. McMillen & Paul Thorsnes, 2006. "Housing Renovations and the Quantile Repeat-Sales Price Index," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 34(4), pages 567-584, December.
  3. Case, Bradford & Quigley, John M, 1991. "The Dynamics of Real Estate Prices," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 50-58, February.
  4. William Goetzmann & Liang Peng, 2006. "Estimating House Price Indexes in the Presence of Seller Reservation Prices," The Review of Economics and Statistics, MIT Press, vol. 88(1), pages 100-112, February.
  5. Wheaton, William C, 1990. "Vacancy, Search, and Prices in a Housing Market Matching Model," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1270-92, December.
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  7. Richard Arnott & Paul Anglin, 1995. "Are Brokers' Commission Rates on Home Sales Too High? A Conceptual Analysis," Boston College Working Papers in Economics 302., Boston College Department of Economics.
  8. Zhenguo Lin & Kerry D. Vandell, 2007. "Illiquidity and Pricing Biases in the Real Estate Market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 35(3), pages 291-330, 09.
  9. Donald Haurin, 1988. "The Duration of Marketing Time of Residential Housing," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 16(4), pages 396-410.
  10. Abdullah Yavaş, 1992. "A Simple Search and Bargaining Model of Real Estate Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 20(4), pages 533-548.
  11. Shaun Bond & Soosung Hwang & Zhenguo Lin & Kerry Vandell, 2007. "Marketing Period Risk in a Portfolio Context: Theory and Empirical Estimates from the UK Commercial Real Estate Market," The Journal of Real Estate Finance and Economics, Springer, vol. 34(4), pages 447-461, May.
  12. Karl E. Case & Robert J. Shiller, 1990. "Forecasting Prices and Excess Returns in the Housing Market," NBER Working Papers 3368, National Bureau of Economic Research, Inc.
  13. John R. Knight, 2002. "Listing Price, Time on Market, and Ultimate Selling Price: Causes and Effects of Listing Price Changes," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 30(2), pages 213-237.
  14. Ping Cheng & Zhenguo Lin & Yingchun Liu, 2008. "A Model of Time-on-Market and Real Estate Price Under Sequential Search with Recall," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 36(4), pages 813-843, December.
  15. Edward Rosenthal, 2011. "A Pricing Model for Residential Homes with Poisson Arrivals and a Sales Deadline," The Journal of Real Estate Finance and Economics, Springer, vol. 42(2), pages 143-161, February.
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