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Examining the Cash-Only Price Discount and the Driving Forces of Cash-Only Transactions in the Housing Market

Author

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  • Youngme Seo

    (Ryerson University)

  • Cynthia Holmes

    (Ryerson University)

  • Mark (Seung Hwan) Lee

    (Ted Rogers School of Management, Ryerson University)

Abstract

This paper investigates the effects of cash-only transactions on residential property values before, during and after the financial crisis. Using a comprehensive database of residential property sales in Tallahassee, FL from 2006 to 2015 and a propensity score matching model, we find that, on average, cash-only transaction is associated with a 4.9% discount to the overall housing price. Further analyses reveal that the cash-only discount is present only in the lower- price segment after the financial crisis. Although cash-only transactions are more common for distressed, investor-purchased and rental properties, we find no significant cash-only price discount for these property categories except for the lower-priced segment. Overall, we demonstrate that cash-only price discounts are less contingent on the distressed status, but more so driven by the increased supply and attractiveness of lower-priced homes by investors.

Suggested Citation

  • Youngme Seo & Cynthia Holmes & Mark (Seung Hwan) Lee, 2023. "Examining the Cash-Only Price Discount and the Driving Forces of Cash-Only Transactions in the Housing Market," The Journal of Real Estate Finance and Economics, Springer, vol. 67(3), pages 480-516, October.
    • Handle: RePEc:kap:jrefec:v:67:y:2023:i:3:d:10.1007_s11146-020-09807-z
    DOI: 10.1007/s11146-020-09807-z
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    References listed on IDEAS

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