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Equity and Time to Sale in the Real Estate Market

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  • Genesove, D.
  • Mayer, C.J.

Abstract

Evidence from the Boston condominium market of the early 1990s reveals that an owner's equity position determines his experience as a seller. An owner of a property with a high loan-to-value ratio sets a higher asking price, has a higher expected time on the market and, if he sells, receives a higher price than an owner with proportionately less debt. The down payment requirement for purchasers, but not incumbent owners, provides a simple explanation for this phenomenon among owner-occupants. The results provide supporting evidence for equity-based aggregate theories of price- volume movements in the housing market. Copyright 1997 by American Economic Association.

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Bibliographic Info

Paper provided by Massachusetts Institute of Technology (MIT), Department of Economics in its series Working papers with number 94-02.

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Length: 23 pages
Date of creation: 1994
Date of revision:
Handle: RePEc:mit:worpap:94-02

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Postal: MASSACHUSETTS INSTITUTE OF TECHNOLOGY (MIT), DEPARTMENT OF ECONOMICS, 50 MEMORIAL DRIVE CAMBRIDGE MASSACHUSETTS 02142 USA
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Postal: MASSACHUSETTS INSTITUTE OF TECHNOLOGY (MIT), DEPARTMENT OF ECONOMICS, 50 MEMORIAL DRIVE CAMBRIDGE MASSACHUSETTS 02142 USA
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Keywords: real property;

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References

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  1. Lawrence D. Jones, 1989. "Current Wealth and Tenure Choice," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(1), pages 17-40.
  2. Karl E. Case & Robert J. Shiller, 1988. "The Efficiency of the Market for Single-Family Homes," NBER Working Papers 2506, National Bureau of Economic Research, Inc.
  3. Stein, Jeremy C, 1995. "Prices and Trading Volume in the Housing Market: A Model with Down-Payment Effects," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 379-406, May.
  4. Karl E. Case & Robert J. Shiller, 1988. "The behavior of home buyers in boom and post-boom markets," New England Economic Review, Federal Reserve Bank of Boston, issue Nov, pages 29-46.
  5. Meese Richard & Wallace Nancy, 1994. "Testing the Present Value Relation for Housing Prices: Should I Leave My House in San Francisco?," Journal of Urban Economics, Elsevier, vol. 35(3), pages 245-266, May.
  6. Topel, Robert H & Rosen, Sherwin, 1988. "Housing Investment in the United States," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 718-40, August.
  7. Robert J. Shiller, 1991. "Arithmetic Repeat Sales Price Estimators," Cowles Foundation Discussion Papers 971, Cowles Foundation for Research in Economics, Yale University.
  8. Barton A. Smith & William P. Tesarek, 1991. "House Prices and Regional Real Estate Cycles: Market Adjustments in Houston," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 19(3), pages 396-416.
  9. Peter Linneman & Susan Wachter, 1989. "The Impacts of Borrowing Constraints on Homeownership," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(4), pages 389-402.
  10. Christopher J. Mayer, 1993. "Taxes, income distribution, and the real estate cycle: why all houses do not appreciate at the same rate," New England Economic Review, Federal Reserve Bank of Boston, issue May, pages 39-50.
  11. Shleifer, Andrei & Vishny, Robert W, 1992. " Liquidation Values and Debt Capacity: A Market Equilibrium Approach," Journal of Finance, American Finance Association, vol. 47(4), pages 1343-66, September.
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