Equity and time to sale in the real estate market
Estimates from the Boston condominium market show that owners with high loan-to-value ratios take longer to sell their properties than owners with low loan-to-value ratios. When sold, properties with high loan-to-value ratios receive a higher price than units with less debt. Both of these results are consistent with a search model in which owners "constrained" by large amounts of debt set a higher reservation price than "unconstrained" owners, accepting a lower probability of sale in exchange for a higher final sales price, and thus lend credibility to theoretical models that establish a link between sales volume and prices through changes in the equity of existing homeowners.
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| Length: | |
| Date of creation: | 1993 |
| Date of revision: | |
| Publication status: | Published in American Economic Review 87, no. 3 (June 1997): 255-69. |
| Handle: | RePEc:fip:fedbwp:93-6 |
| Contact details of provider: | Postal: 600 Atlantic Avenue, Boston, Massachusetts 02210 Phone: 617-973-3397 Fax: 617-973-4221 Web page: http://www.bos.frb.org/ Email: More information through EDIRC
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References listed on IDEAS
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- Topel, Robert H & Rosen, Sherwin, 1988. "Housing Investment in the United States," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 718-40, August.
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- Shleifer, Andrei & Vishny, Robert W., 1992.
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Scholarly Articles
27692663, Harvard University Department of Economics.
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- Karl E. Case & Robert J. Shiller, 1988. "The Efficiency of the Market for Single-Family Homes," NBER Working Papers 2506, National Bureau of Economic Research, Inc.
- Barton A. Smith & William P. Tesarek, 1991. "House Prices and Regional Real Estate Cycles: Market Adjustments in Houston," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 19(3), pages 396-416.
- Robert J. Shiller, 1991. "Arithmetic Repeat Sales Price Estimators," Cowles Foundation Discussion Papers 971, Cowles Foundation for Research in Economics, Yale University.
- Peter Linneman & Susan Wachter, 1989. "The Impacts of Borrowing Constraints on Homeownership," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(4), pages 389-402.
- Jeremy C. Stein, 1993. "Prices and Trading Volume in the Housing Market: A Model with Downpayment Effects," NBER Working Papers 4373, National Bureau of Economic Research, Inc.
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