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What is the role of the asking price for a house?

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  • Han, Lu
  • Strange, William C.

Abstract

This paper considers the role of the asking price in housing transactions both theoretically and empirically. Significant fractions of housing transactions involve sales prices that are either below or above asking price, which might suggest that asking price has limited relevance. However, many housing transactions involve a sales price exactly equal to asking price (a fact that has previously drawn little notice), strongly suggesting that asking price does matter. The paper develops a model where asking price is neither a binding commitment nor a ceiling, yet still directs buyer search and impacts sales price. Using novel survey data, the paper provides empirical evidence consistent with asking price playing a directing role in buyer search. Consistent with theory, this effect is stronger for more atypical houses and in bust markets.

Suggested Citation

  • Han, Lu & Strange, William C., 2016. "What is the role of the asking price for a house?," Journal of Urban Economics, Elsevier, vol. 93(C), pages 115-130.
  • Handle: RePEc:eee:juecon:v:93:y:2016:i:c:p:115-130
    DOI: 10.1016/j.jue.2016.03.008
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    References listed on IDEAS

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    Cited by:

    1. Carolin Fritzsche & Lars Vandrei, 2018. "Causes of Vacancies in the Housing Market – A Literature Review," ifo Working Paper Series 258, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    2. repec:eee:juecon:v:105:y:2018:i:c:p:107-120 is not listed on IDEAS

    More about this item

    Keywords

    Real estate; Housing; Search; Asking price;

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • 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

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