The Impact of Property Condition Disclosure Laws on Housing Prices: Evidence from an Event Study using Propensity Scores
AbstractWe examine the impact of seller's Property Condition Disclosure Law on the residential real estate values. A disclosure law may address the information asymmetry in housing transactions shifting of risk from buyers and brokers to the sellers and raising housing prices as a result. We combine propensity score techniques from the treatment effects literature with a traditional event study approach. We assemble a unique set of economic and institutional attributes for a quarterly panel of 291 US Metropolitan Statistical Areas (MSAs) and 50 US States spanning 21 years from 1984 to 2004 is used to exploit the MSA level variation in house prices. The study finds that the average seller may be able to fetch a higher price (about three to four percent) for the house if she furnishes a state-mandated seller.s property condition disclosure statement to the buyer. When we compare the results from parametric and semi-parametric event analyses, we find that the semi-parametric or the propensity score analysis generals moderately larger estimated effects of the law on housing prices.
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Bibliographic InfoPaper provided by University of Connecticut, Department of Economics in its series Working papers with number 2008-39.
Length: 33 pages
Date of creation: Sep 2008
Date of revision:
Note: Authors acknowledge helpful comments from John Clapp, Dennis Heffley, James Davis, Katherine Pancak, Thomas Miceli, and seminar participants at the University of Connecticut, Economics Brownbag Seminar Series, and 2006 AREUEA Doctoral Session in Boston. We would also like to thank Tim Storey (National Conference of State Legislatures), Daniel Conti (Bureau of Labor Statistics) for assistance with data, and Sascha Becker of University of Munich for assistance with STATA module on propensity score matching algorithm (written by Sascha Becker and Andrea Ichino).
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Property Condition Disclosure; Housing Price Index; Propensity Score Matching; Event Study;
Other versions of this item:
- Anupam Nanda & Stephen Ross, 2012. "The Impact of Property Condition Disclosure Laws on Housing Prices: Evidence from an Event Study Using Propensity Scores," The Journal of Real Estate Finance and Economics, Springer, vol. 45(1), pages 88-109, June.
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- K11 - Law and Economics - - Basic Areas of Law - - - Property Law
- L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services
- R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-10-13 (All new papers)
- NEP-GEO-2008-10-13 (Economic Geography)
- NEP-LAW-2008-10-13 (Law & Economics)
- NEP-URE-2008-10-13 (Urban & Real Estate Economics)
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- Van Vliet, Olaf & Been, Jim & Caminada, Koen & Goudswaard, Kees, 2011. "Pension reform and income inequality among the elderly in 15 European countries," MPRA Paper 32940, University Library of Munich, Germany.
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