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Housing Market Microstructure

  • Hazer Inaltekin
  • Robert Jarrow
  • Mehmet Saglam
  • Yildiray Yildirim

In this article, we develop a model for the evolution of real estate prices. A wide range of inputs, including stochastic interest rates and changing demands for the asset, are considered. Maximizing their expected utility, home owners make optimal sale decisions given these changing market conditions. Using these optimal sale decisions, we simulate the implied evolution of housing prices providing insights into the recent subprime lending crisis.

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File URL: http://arxiv.org/pdf/0907.1853
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Paper provided by arXiv.org in its series Papers with number 0907.1853.

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Date of creation: Jul 2009
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Handle: RePEc:arx:papers:0907.1853
Contact details of provider: Web page: http://arxiv.org/

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  1. Steven R. Grenadier & Neng Wang, 2005. "Investment Timing, Agency, and Information," NBER Working Papers 11148, National Bureau of Economic Research, Inc.
  2. Ortalo-Magné, François & Rady, Sven, 2001. "Housing Market Dynamics: On the Contribution of Income Shocks and Credit Constraints," CEPR Discussion Papers 3015, C.E.P.R. Discussion Papers.
  3. David Genesove & Christopher J. Mayer, 1993. "Equity and time to sale in the real estate market," Working Papers 93-6, Federal Reserve Bank of Boston.
  4. Daniel P. McMillen & Paul Thorsnes, 2006. "Housing Renovations and the Quantile Repeat-Sales Price Index," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 34(4), pages 567-584, December.
  5. Karl E. Case & Robert J. Shiller, 1990. "Forecasting Prices and Excess Returns in the Housing Market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 18(3), pages 253-273.
  6. Sass, Tim R, 1988. "A Note on Optimal Price Cutting Behavior under Demand Uncertainty," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 336-39, May.
  7. Case, Bradford & Quigley, John M, 1991. "The Dynamics of Real Estate Prices," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 50-58, February.
  8. William Goetzmann & Liang Peng, 2006. "Estimating House Price Indexes in the Presence of Seller Reservation Prices," The Review of Economics and Statistics, MIT Press, vol. 88(1), pages 100-112, February.
  9. Williams, Joseph T, 1995. "Pricing Real Assets with Costly Search," Review of Financial Studies, Society for Financial Studies, vol. 8(1), pages 55-90.
  10. Norman G. Miller, 1978. "Time on the Market and Selling Price," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 6(2), pages 164-174.
  11. Lucas, Robert Jr. & Prescott, Edward C., 1974. "Equilibrium search and unemployment," Journal of Economic Theory, Elsevier, vol. 7(2), pages 188-209, February.
  12. Rajiv Kalra & Kam Chan & Pikki Lai, 1997. "Time on market and sales price of residential housing: A note," Journal of Economics and Finance, Springer, vol. 21(2), pages 63-66, June.
  13. John R. Knight, 2002. "Listing Price, Time on Market, and Ultimate Selling Price: Causes and Effects of Listing Price Changes," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 30(2), pages 213-237.
  14. Zhenguo Lin & Kerry D. Vandell, 2007. "Illiquidity and Pricing Biases in the Real Estate Market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 35(3), pages 291-330, 09.
  15. Donald Haurin, 1988. "The Duration of Marketing Time of Residential Housing," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 16(4), pages 396-410.
  16. Michel Glower & Donald R. Haurin & Patric H. Hendershott, 1998. "Selling Time and Selling Price: The Influence of Seller Motivation," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 26(4), pages 719-740.
  17. Fred A. Forgey & Ronald C. Rutherford & Thomas M. Springer, 1996. "Search and Liquidity in Single-Family Housing," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 24(3), pages 273-292.
  18. Taylor, Curtis R, 1999. "Time-on-the-Market as a Sign of Quality," Review of Economic Studies, Wiley Blackwell, vol. 66(3), pages 555-78, July.
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