Competition and market structure in local real estate markets
AbstractThe 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.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 27531.
Date of creation: 15 Dec 2010
Date of revision:
HHI; real estate brokerage competition; Herfindahl-Hirschman Index;
Find related papers by JEL classification:
- L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-01-03 (All new papers)
- NEP-COM-2011-01-03 (Industrial Competition)
- NEP-URE-2011-01-03 (Urban & Real Estate Economics)
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