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Does the asking price matter? Evidence from a natural experiment in residential real estate

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  • Anders Österling

Abstract

I study a staggered policy change directly affecting only the asking price of homes for sale, using a novel and large micro dataset. I find that increasing the asking price reduces the number of online views, the number of visitors to the open house viewings, the number of bidders participating in the auction-like sales process and increases the time on market. Contrary to predictions of standard theory I find no effect on the sales price, nor on the sales effort exerted by real estate agents. To explain these findings I develop a simple search model where the non-committing asking price directs search and real estate agents set the asking price optimally. The model is consistent with the empirical results when home buyers follow a simple rule of thumb, but not when they act fully rational.

Suggested Citation

  • Anders Österling, 2016. "Does the asking price matter? Evidence from a natural experiment in residential real estate," ERES eres2016_11, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2016_11
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    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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