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Resale Externality and the Used Housing Market

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  • Shinichiro Iwata
  • Hisaki Yamaga

Abstract

The selling prices of used houses may not fully reflect the maintenance spending of current owners when prospective buyers are unable to conduct a thorough inspection before purchase. This article investigates how this resale externality problem affects the maintenance expenditures of homeowners. After considering both observable and unobservable repair expenses, the analysis shows that the resale externality reduces not only maintenance expenditures, but also household mobility. A treatment effects model is used to estimate the simultaneous relationship between mobility and maintenance in the Japanese resale housing market. The results indicate that the resale externality has a significant negative impact on maintenance expenditures. Copyright 2007 American Real Estate and Urban Economics Association

Suggested Citation

  • Shinichiro Iwata & Hisaki Yamaga, 2007. "Resale Externality and the Used Housing Market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 35(3), pages 331-347, September.
  • Handle: RePEc:bla:reesec:v:35:y:2007:i:3:p:331-347
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    Cited by:

    1. Peter E. Earl & Ti-Ching Peng, 2011. "Home Improvements," Chapters,in: Handbook on the Economics of Leisure, chapter 10 Edward Elgar Publishing.

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