Equity and Time to Sale in the Real Estate Market
Recent research has proposed a pro-cyclical link between sales volume and prices in the real estate market through changes in the equity of existing homeowners. This article uses data from the Boston condominium market to show that owners with high loan-to-value ratios take longer to sell their properties than owners with low loan-to- value ratios. Properties with high loan-to-value ratios are listed at higher asking prices; when sold, they receive higher prices than units with less debt. Together, 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.
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- Robert J. Shiller, 1991. "Arithmetic Repeat Sales Price Estimators," Cowles Foundation Discussion Papers 971, Cowles Foundation for Research in Economics, Yale University.
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- Lawrence D. Jones, 1989. "Current Wealth and Tenure Choice," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(1), pages 17-40. Full references (including those not matched with items on IDEAS)
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