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The Impact of iBuyers on Housing Market Dynamics

Author

Listed:
  • David M. Harrison

    (University of Central Florida)

  • Michael J. Seiler

    (College of William & Mary)

  • Liuming Yang

    (The Chinese University of Hong Kong)

Abstract

Technological innovation continues to disrupt virtually every sector of the U.S. economy. This paper explores one such innovation, namely iBuyers (i.e., firms who use PropTech to provide online quotes and make quick cash offers on homes), and studies their impact on various housing market dynamics. More specifically, we find the presence of iBuyers increases home prices in local markets by up to 2.8%. We further hypothesize that strategic behavior on the part of home sellers, and particularly increased “fishing” for high offers after the entrance of iBuyers into a market, helps explain this phenomenon. This explanation is strongly supported by an observable increase in both time on market (TOM) and listing prices following the entry of iBuyers. Lastly, we find iBuyers compete with and crowd out potential local homebuyers, forcing them into neighboring markets, and thereby causing home prices in these adjacent ZIP codes to increase as well.

Suggested Citation

  • David M. Harrison & Michael J. Seiler & Liuming Yang, 2024. "The Impact of iBuyers on Housing Market Dynamics," The Journal of Real Estate Finance and Economics, Springer, vol. 68(3), pages 425-461, April.
    • Handle: RePEc:kap:jrefec:v:68:y:2024:i:3:d:10.1007_s11146-023-09954-z
    DOI: 10.1007/s11146-023-09954-z
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    More about this item

    Keywords

    PropTech; iBuyers; Housing market; Fishing; Spillover effects;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L8 - Industrial Organization - - Industry Studies: Services
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General

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