Loss Aversion and Seller Behavior: Evidence from the Housing Market
Data from downtown Boston in the 1990s show that loss aversion determines seller behavior in the housing market. Condominium owners subject to nominal losses 1) set higher asking prices of 25-35 percent of the difference between the property's expected selling price and their original purchase price; 2) attain higher selling prices of 3-18 percent of that difference; and 3) exhibit a much lower sale hazard than other sellers. The list price results are twice as large for owner-occupants as investors, but hold for both. These findings are consistent with prospect theory and help explain the positive price-volume correlation in real estate markets.
|Date of creation:||Mar 2001|
|Date of revision:|
|Publication status:||published as Genesove, David and Christohper Mayer. "Loss Aversion And Seller Behavior: Evidence From The Housing Market," Quarterly Journal of Economics, 2001, v116(4,Nov), 1233-1260.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- David Genesove & Christopher Mayer, 2001.
"Loss Aversion and Seller Behavior: Evidence from the Housing Market,"
NBER Working Papers
8143, National Bureau of Economic Research, Inc.
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