Loss aversion, equity constraints and seller behavior in the real estate market
AbstractI develop an estimation strategy that can point identify the effects of loss aversion and equity constraints on selling prices using a long panel of data from the San Francisco Bay Area real estate market. I find strong evidence that owners facing nominal losses on their housing investments and owners with high LTV ratios sell for higher prices, on average, and the effects are larger than previously thought. I also present new empirical findings that support the theory that down-payment constraints or other institutional details of the mortgage market drive the relationship between LTV and prices. The results have implications for understanding how local housing market variables such as prices and volume are determined in slow markets.
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Bibliographic InfoArticle provided by Elsevier in its journal Regional Science and Urban Economics.
Volume (Year): 41 (2011)
Issue (Month): 1 (January)
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Web page: http://www.elsevier.com/locate/regec
Equity constraints Loss aversion Search in housing markets Selling behavior Cold housing markets Well known papers by David Genesove and Chris Mayer;
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