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Market Thinness, List Price Revisions and Time to Sell: Evidence from a large-scale housing dataset

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Author Info
Marco Hoeberichts
Maarten van Rooij
Arjen Siegmann

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Abstract

This paper uses a large dataset, covering more than 70% of the Dutch housing market, to analyze the relationship between market thinness, price setting behavior and time to sell. Our findings confirm the typical result that overpricing increases the time on market. In addition, we find evidence of quicker list price reductions suggesting that overpricing is part of a strategy to search for the opportunity of high revenues and to learn about the market. Moreover, we are able to confirm the theory put forward by Lazear (1986) on the relation between atypical goods and the speed of price adjustments. Sellers of atypical houses are more uncertain about the price buyers want to pay and take time to learn about the market, thereby increasing the expected time on market and the time to price revisions. Market liquidity has a positive, i.e. shortening, effect on the time to sale and leads to quicker price revisions due to the increased opportunities for learning.

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Publisher Info
Paper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 176.

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Date of creation: May 2008
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Handle: RePEc:dnb:dnbwpp:176

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Related research
Keywords: market liquidity; pricing strategies; marketing time; overpricing; housing;

Find related papers by JEL classification:
R31 - Urban, Rural, and Regional Economics - - Production Analysis and Firm Location - - - Housing Supply and Markets
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis
E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. 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. [Downloadable!] (restricted)
  2. Pieter A. Gautier & Arjen Siegmann & Aico Van Vuuren, 2007. "The Effect of the Theo van Gogh Murder on House Prices in Amsterdam," IZA Discussion Papers 2579, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  3. Geoffrey K. Turnbull & Jonathan Dombrow & C.F. Sirmans, 2006. "Big House, Little House: Relative Size and Value," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 34(3), pages 439-456, 09. [Downloadable!] (restricted)
  4. 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. [Downloadable!] (restricted)
  5. David Genesove & Christopher Mayer, 2001. "Loss Aversion and Seller Behavior: Evidence from the Housing Market," NBER Working Papers 8143, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Sass, Tim R, 1988. "A Note on Optimal Price Cutting Behavior under Demand Uncertainty," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 336-39, May. [Downloadable!] (restricted)
  7. Rutherford, R.C. & Springer, T.M. & Yavas, A., 2005. "Conflicts between principals and agents: evidence from residential brokerage," Journal of Financial Economics, Elsevier, vol. 76(3), pages 627-665, June. [Downloadable!] (restricted)
  8. Genesove, David & Mayer, Christopher J, 1997. "Equity and Time to Sale in the Real Estate Market," American Economic Review, American Economic Association, vol. 87(3), pages 255-69, June. [Downloadable!] (restricted)
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  9. Gwilym Pryce & Kenneth Gibb, 2006. "Submarket Dynamics of Time to Sale," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 34(3), pages 377-415, 09. [Downloadable!] (restricted)
  10. Michel Glower & Donald R. Haurin & Patric H. Hendershott, 1998. "Selling Time and Selling Price: The Influence of Seller Motivation," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 26(4), pages 719-740. [Downloadable!] (restricted)
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