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On the role of public price information in housing markets

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  • Eerola, Essi
  • Lyytikäinen, Teemu

Abstract

This paper studies the impact of disclosing detailed house price information on the functioning of the housing market. We first study the effects of increased information on market outcomes in a theoretical framework where sellers are uncertain about the demand their house faces. We argue that increased information is more valuable to sellers who underestimate the value of their house than to sellers who overestimate the value of their house. Because of this asymmetry, house price information leads to higher prices. If more detailed information also improves matching in the housing market, higher prices may be accompanied by shorter time on the market. In the empirical part of the paper, we utilize a Finnish policy intervention to estimate these effects. In 2007, a website with detailed information about individual housing transactions in part of the country was opened. Differences-in-Differences estimation results suggest that increased information on past transactions led to higher prices and faster sales.

Suggested Citation

  • Eerola, Essi & Lyytikäinen, Teemu, 2015. "On the role of public price information in housing markets," Regional Science and Urban Economics, Elsevier, vol. 53(C), pages 74-84.
  • Handle: RePEc:eee:regeco:v:53:y:2015:i:c:p:74-84 DOI: 10.1016/j.regsciurbeco.2015.05.006
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    Cited by:

    1. repec:red:issued:15-259 is not listed on IDEAS
    2. repec:bof:bofrdp:urn:nbn:fi:bof-201510061415 is not listed on IDEAS
    3. Gibbons, Steve & Overman, Henry G. & Patacchini, Eleonora, 2015. "Spatial Methods," Handbook of Regional and Urban Economics, Elsevier.
    4. Eerola, Essi & Määttänen, Niku, 2013. "Matching in the housing market with risk aversion and savings," ETLA Working Papers 3, The Research Institute of the Finnish Economy.
    5. Eerola, Essi & Määttänen, Niku, 2015. "Matching and credit frictions in the housing market," Research Discussion Papers 20/2015, Bank of Finland.

    More about this item

    Keywords

    Housing prices; Time on the market; Information; Learning; Differences-in-Differences;

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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