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Expectation Adjustment in the Housing Market: Insights from the Scottish Auction System

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  • Sotirios Thanos
  • Michael White

Abstract

This paper examines price expectation adjustment of house buyers and sellers to rapid changes in the housing market using data from Scotland where houses are sold through 'first-price sealed-bid' auctions. These auctions provide more information on market signals, incentives and the behaviour of market participants than private treaty sales. This paper therefore provides a theoretical framework for analysing revealed preference data generated from these auctions. We specifically focus on the analysis of the selling to asking price difference, the 'bid-premium'. The bid-premium is shown to be affected by expectations of future price movements, market duration and high bidding frequency. The bid-premium reflects consumer's expectations, adapting to market conditions more promptly than asking price setting behaviour and final sale prices. The volatile conditions of the recent housing market bubble are fully reflected in the bid-premium, whereas the asking and sale prices are much less prone to rapid movements.

Suggested Citation

  • Sotirios Thanos & Michael White, 2014. "Expectation Adjustment in the Housing Market: Insights from the Scottish Auction System," Housing Studies, Taylor & Francis Journals, vol. 29(3), pages 339-361, April.
  • Handle: RePEc:taf:chosxx:v:29:y:2014:i:3:p:339-361
    DOI: 10.1080/02673037.2013.783200
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    File URL: http://hdl.handle.net/10.1080/02673037.2013.783200
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    References listed on IDEAS

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    1. John Y. Campbell & Stefano Giglio & Parag Pathak, 2011. "Forced Sales and House Prices," American Economic Review, American Economic Association, vol. 101(5), pages 2108-2131, August.
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    Cited by:

    1. Thanos, Sotirios & Dubé, Jean & Legros, Diègo, 2016. "Putting time into space: the temporal coherence of spatial applications in the housing market," Regional Science and Urban Economics, Elsevier, vol. 58(C), pages 78-88.
    2. Alison Watts, 2016. "Auctions Versus Private Negotiations in Buyer-Seller Networks," Games, MDPI, Open Access Journal, vol. 7(3), pages 1-14, August.
    3. Jean Dubé & Diègo Legros & Sotirios Thanos, 2018. "Past price ‘memory’ in the housing market: testing the performance of different spatio-temporal specifications," Spatial Economic Analysis, Taylor & Francis Journals, vol. 13(1), pages 118-138, January.
    4. Sotirios Thanos & Abigail L. Bristow & Mark R. Wardman, 2015. "Residential Sorting And Environmental Externalities: The Case Of Nonlinearities And Stigma In Aviation Noise Values," Journal of Regional Science, Wiley Blackwell, vol. 55(3), pages 468-490, June.
    5. Ozhegov, Evgeniy M. & Sidorovykh, Aleksandra S., 2017. "Heterogeneity of sellers in housing market: Difference in pricing strategies," Journal of Housing Economics, Elsevier, vol. 37(C), pages 42-51.

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