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Heterogeneous Real Estate Agents and the Housing Cycle

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  • Sophia Gilbukh
  • Paul Goldsmith-Pinkham

Abstract

The real estate market is highly intermediated, with 90 percent of buyers and sellers hiring an agent to help them transact a house. However, low barriers to entry and fixed commission rates result in a market where inexperienced intermediaries have a large market share, especially following house price booms. Using rich micro-level data on 8.5 million listings and a novel instrumental variables research design, we first show that houses listed for sale by inexperienced real estate agents have a lower probability of selling, and this effect is strongest during the housing bust. We then study the aggregate implications of the distribution of agents' experience on housing market liquidity by building a dynamic entry and exit model of real estate agents with aggregate shocks. We find that 3.7 more listings would have been sold in a flexible commission equilibrium. It would require a six-fold increase in entry costs for real estate agents to achieve this level of liquidity within the fixed commission framework.

Suggested Citation

  • Sophia Gilbukh & Paul Goldsmith-Pinkham, 2023. "Heterogeneous Real Estate Agents and the Housing Cycle," NBER Working Papers 31683, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31683
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    Cited by:

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    2. Sumit Agarwal & John R. Grigsby & Ali Hortaçsu & Gregor Matvos & Amit Seru, 2020. "Searching for Approval," Working Papers 2020-1, Princeton University. Economics Department..
    3. Natalya Bikmetova & Geoffrey K. Turnbull & Velma Zahirovic‐Herbert, 2023. "Ethnicity in housing markets: Buyers, sellers and agents," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 51(1), pages 196-232, January.

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    More about this item

    JEL classification:

    • G5 - Financial Economics - - Household Finance
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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