Motivated Sellers in the Housing Market
AbstractWe present a search-and-matching model of the housing market where potential buyers' willingness to pay is private information and sellers may become desperate as they are unable to sell. A unique steady state equilibrium exists where desperate sellers offer sizeable price cuts and sell faster. If the number of distressed sales rises then even relaxed sellers are forced to lower their prices. Buyers, on the other hand, become more selective and search longer for better deals. The model yields a theoretical density function of the time-to-sale, which is positively skewed and may be hump-shaped. These results are consistent with recent empirical findings.
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Bibliographic InfoPaper provided by Cardiff University, Cardiff Business School, Economics Section in its series Cardiff Economics Working Papers with number E2010/2.
Length: 29 pages
Date of creation: Mar 2010
Date of revision:
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More information through EDIRC
housing; private information; random search; motivated sellers;
Find related papers by JEL classification:
- D39 - Microeconomics - - Distribution - - - Other
- D49 - Microeconomics - - Market Structure and Pricing - - - Other
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-03-28 (All new papers)
- NEP-CTA-2010-03-28 (Contract Theory & Applications)
- NEP-DGE-2010-03-28 (Dynamic General Equilibrium)
- NEP-URE-2010-03-28 (Urban & Real Estate Economics)
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