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The Home Selling Problem: Theory And Evidence

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  • Antonio Merlo
  • François Ortalo‐Magné
  • John Rust

Abstract

We formulate and solve the problem of a homeowner who wants to sell her house for the maximum possible price net of transactions costs. We estimate this model using data on transaction histories for 780 residential properties in England. The estimated model fits list price dynamics and other key features of the data. In particular, a tiny menu cost of changing the listing price, as little as ten thousandths of 1% of the house value, is sufficient to explain the high degree of stickiness of listing prices observed in the data.

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  • Antonio Merlo & François Ortalo‐Magné & John Rust, 2015. "The Home Selling Problem: Theory And Evidence," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56(2), pages 457-484, May.
    • Handle: RePEc:wly:iecrev:v:56:y:2015:i:2:p:457-484
    DOI: 10.1111/iere.12111
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    Cited by:

    1. Julien Pascal, 2023. "Rental housing market and directed search," BCL working papers 179, Central Bank of Luxembourg.
    2. Hedlund, Aaron, 2016. "Illiquidity and its discontents: Trading delays and foreclosures in the housing market," Journal of Monetary Economics, Elsevier, vol. 83(C), pages 1-13.
    3. Paul E. Carrillo & William M. Doerner & William D. Larson, 2023. "House Price Markups and Mortgage Defaults," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 55(4), pages 747-782, June.
    4. Bell, Adrian R. & Brooks, Chris & Killick, Helen, 2022. "The first real estate bubble? Land prices and rents in medieval England c. 1300–1500," Research in International Business and Finance, Elsevier, vol. 62(C).
    5. Daniel Broxterman & Tingyu Zhou, 2023. "Information Frictions in Real Estate Markets: Recent Evidence and Issues," The Journal of Real Estate Finance and Economics, Springer, vol. 66(2), pages 203-298, February.
    6. Fan, Ying & Fu, Yuqi & Yang, Zan & Chen, Ming, 2024. "Search frictions in rental markets: Evidence from urban China," China Economic Review, Elsevier, vol. 83(C).
    7. Han, Lu & Strange, William C., 2015. "The Microstructure of Housing Markets," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 813-886, Elsevier.
    8. Eileen van Straelen, 2021. "Desperate House Sellers: Distress Among Developers," Finance and Economics Discussion Series 2021-065, Board of Governors of the Federal Reserve System (U.S.).
    9. 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.
    10. Tingyu Zhou & John M Clapp & Ran Lu‐Andrews, 2022. "Examining omitted variable bias in anchoring premium estimates: Evidence based on assessed value," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(3), pages 789-828, September.
    11. Borys Grochulski & Zhu Wang, 2024. "Real Estate Commissions and Homebuying," Working Paper 24-01, Federal Reserve Bank of Richmond.
    12. Vandenbergh, Joren, 2024. "Seller and search behavior in the Belgian housing market," Journal of Housing Economics, Elsevier, vol. 64(C).
    13. Duranton, Gilles & Puga, Diego, 2015. "Urban Land Use," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 467-560, Elsevier.
    14. John M. Clapp & Ran Lu‐Andrews & Tingyu Zhou, 2020. "Anchoring to Purchase Price and Fundamentals: Application of Salience Theory to Housing Cycle Diagnosis," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 48(4), pages 1274-1317, December.
    15. Fan, Ying & Fu, Yuqi & Yang, Zan & Chen, Ming, 2023. "Search Frictions in Rental Markets: Evidence from Urban China," Working Paper Series 23/11, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.
    16. Lawrence Kryzanowski & Yanting Wu, 2023. "Signaling effects of recurrent list‐price reductions on the likelihood of house sales," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 46(1), pages 99-130, February.
    17. Elliot Anenberg & Steven Laufer, 2014. "Using Data on Seller Behavior to Forecast Short-run House Price Changes," Finance and Economics Discussion Series 2014-16, Board of Governors of the Federal Reserve System (U.S.).

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