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Housing prices and the optimal time-on-the-market decision

Author

Listed:
  • İnaltekin, Hazer
  • Jarrow, Robert A.
  • Sağlam, Mehmet
  • Yıldırım, Yıldıray

Abstract

This paper provides a model for housing prices based on a seller solving the optimal time-on-the market problem. Given the seller’s optimal time-on-the market, analytical expressions are provided for both the expected time-on-the-market and the sales price. These expressions facilitate the computation of comparative statics. Consistent with economic intuition, we show that (i) both the expected time-on-the market and sales price decrease as interest rates increase, (ii) the expected time-on-the market increases and the expected sales price decreases as offer activity declines, and (iii) the expected time-on-the market and expected sales price both increase as the list price increases.

Suggested Citation

  • İnaltekin, Hazer & Jarrow, Robert A. & Sağlam, Mehmet & Yıldırım, Yıldıray, 2011. "Housing prices and the optimal time-on-the-market decision," Finance Research Letters, Elsevier, vol. 8(4), pages 171-179.
  • Handle: RePEc:eee:finlet:v:8:y:2011:i:4:p:171-179
    DOI: 10.1016/j.frl.2011.06.001
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    References listed on IDEAS

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    More about this item

    Keywords

    Real estate; Sale price; Time-on-the-market; Optimal waiting time;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R34 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Input Demand Analysis

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