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Competition and market structure in local real estate markets

Author

Listed:
  • Beck, Jason
  • Scott, Frank
  • Yelowitz, Aaron

Abstract

The persistence of the standard six percent real estate sales commission across markets and over time calls into question the competitiveness of the residential real estate brokerage industry. While there is anecdotal evidence that some local real estate markets are fairly concentrated, no systematic study of market structures has been conducted. We have collected primary data on the number and market shares of real estate brokers in a variety of small, medium, and large real estate markets across the U.S. for 2007 and 2009. In addition to these cross sectional data, we have also collected longitudinal data on the size distribution of firms for Louisville, KY for a nine-year period. In our cross-sectional analysis of medium and large markets, we find no evidence that market concentration might create problems for competition. We do find that small markets on average have higher HHI’s than medium and large markets. The longitudinal analysis reveals that many small brokers are in and out of the market, selling a house or two one year and selling zero houses the next year.

Suggested Citation

  • Beck, Jason & Scott, Frank & Yelowitz, Aaron, 2010. "Competition and market structure in local real estate markets," MPRA Paper 27531, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:27531
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    References listed on IDEAS

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    1. Lawrence J. White, 2006. "The Residential Real Estate Brokerage Industry: What Would More Vigorous Competition Look Like?," Working Papers 06-06, New York University, Leonard N. Stern School of Business, Department of Economics.
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    7. Anderson, Randy I & Lewis, Danielle & Zumpano, Leonard V, 2000. "Residential Real Estate Brokerage Efficiency from a Cost and Profit Perspective," The Journal of Real Estate Finance and Economics, Springer, vol. 20(3), pages 295-310, May.
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    Citations

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    Cited by:

    1. Michael Dinkel, 2012. "Human behaviour - an underappreciated factor in real estate transaction analyses," ERES eres2012_108, European Real Estate Society (ERES).
    2. Shinichiro Iwata & Kazuto Sumita & Mieko Fujisawa, 2019. "Price competition in the spatial real estate market: allies or rivals?," Spatial Economic Analysis, Taylor & Francis Journals, vol. 14(2), pages 174-195, April.
    3. Yelowitz, Aaron & Scott, Frank & Beck, Jason, 2011. "The market for real estate brokerage services in low- and high-income neighborhoods: A 6 city study," MPRA Paper 35608, University Library of Munich, Germany.
    4. Popov, Alexander, 2022. "The division of spoils in a booming industry," Journal of Economic Behavior & Organization, Elsevier, vol. 198(C), pages 341-369.

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    More about this item

    Keywords

    HHI; real estate brokerage competition; Herfindahl-Hirschman Index;
    All these keywords.

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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