IDEAS home Printed from https://ideas.repec.org/p/uct/uconnp/2008-39.html
   My bibliography  Save this paper

The Impact of Property Condition Disclosure Laws on Housing Prices: Evidence from an Event Study using Propensity Scores

Author

Listed:
  • Anupam Nanda

    (Mumbai)

  • Stephen L. Ross

    (University of Connecticut)

Abstract

We examine the impact of seller's Property Condition Disclosure Law on the residential real estate values. A disclosure law may address the information asymmetry in housing transactions shifting of risk from buyers and brokers to the sellers and raising housing prices as a result. We combine propensity score techniques from the treatment effects literature with a traditional event study approach. We assemble a unique set of economic and institutional attributes for a quarterly panel of 291 US Metropolitan Statistical Areas (MSAs) and 50 US States spanning 21 years from 1984 to 2004 is used to exploit the MSA level variation in house prices. The study finds that the average seller may be able to fetch a higher price (about three to four percent) for the house if she furnishes a state-mandated seller.s property condition disclosure statement to the buyer. When we compare the results from parametric and semi-parametric event analyses, we find that the semi-parametric or the propensity score analysis generals moderately larger estimated effects of the law on housing prices.

Suggested Citation

  • Anupam Nanda & Stephen L. Ross, 2008. "The Impact of Property Condition Disclosure Laws on Housing Prices: Evidence from an Event Study using Propensity Scores," Working papers 2008-39, University of Connecticut, Department of Economics.
  • Handle: RePEc:uct:uconnp:2008-39
    Note: Authors acknowledge helpful comments from John Clapp, Dennis Heffley, James Davis, Katherine Pancak, Thomas Miceli, and seminar participants at the University of Connecticut, Economics Brownbag Seminar Series, and 2006 AREUEA Doctoral Session in Boston. We would also like to thank Tim Storey (National Conference of State Legislatures), Daniel Conti (Bureau of Labor Statistics) for assistance with data, and Sascha Becker of University of Munich for assistance with STATA module on propensity score matching algorithm (written by Sascha Becker and Andrea Ichino).
    as

    Download full text from publisher

    File URL: http://web2.uconn.edu/economics/working/2008-39.pdf
    File Function: Full text
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Judith Clarke & Nilanjana Roy & Marsha Courchane, 2009. "On the robustness of racial discrimination findings in mortgage lending studies," Applied Economics, Taylor & Francis Journals, vol. 41(18), pages 2279-2297.
    2. James J. Heckman & Hidehiko Ichimura & Petra E. Todd, 1997. "Matching As An Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Oxford University Press, vol. 64(4), pages 605-654.
    3. Kiefer, Nicholas M, 1988. "Economic Duration Data and Hazard Functions," Journal of Economic Literature, American Economic Association, vol. 26(2), pages 646-679, June.
    4. Franz Fuerst, 2005. "Exogenous shocks and real estate rental markets: An event study of the 9/11 attacks and their impact on the New York office market," Finance 0509008, EconWPA.
    5. Chris Veld & Yulia V. Veld-Merkoulova, 2008. "An Empirical Analysis of the Stockholder-Bondholder Conflict in Corporate Spin-Offs," Financial Management, Financial Management Association International, vol. 37(1), pages 103-124, March.
    6. Glaeser, Edward L. & Kallal, Hedi D., 1997. "Thin Markets, Asymmetric Information, and Mortgage-Backed Securities," Journal of Financial Intermediation, Elsevier, vol. 6(1), pages 64-86, January.
    7. Michael J. Fishman & Kathleen M. Hagerty, 2003. "Mandatory Versus Voluntary Disclosure in Markets with Informed and Uninformed Customers," Journal of Law, Economics, and Organization, Oxford University Press, vol. 19(1), pages 45-63, April.
    8. Fama, Eugene F, et al, 1969. "The Adjustment of Stock Prices to New Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 10(1), pages 1-21, February.
    9. Anupam Nanda, 2008. "Property Condition Disclosure Law: Why Did States Mandate ‘Seller Tell All’?," The Journal of Real Estate Finance and Economics, Springer, vol. 37(2), pages 131-146, August.
    10. Bittner, Thomas, 2005. "An event study of the Rhenish-Westphalian Coal Syndicate," European Review of Economic History, Cambridge University Press, vol. 9(03), pages 337-364, December.
    11. Heckman, J.J. & Hotz, V.J., 1988. "Choosing Among Alternative Nonexperimental Methods For Estimating The Impact Of Social Programs: The Case Of Manpower Training," University of Chicago - Economics Research Center 88-12, Chicago - Economics Research Center.
    12. Norman Miller & Liang Peng, 2006. "Exploring Metropolitan Housing Price Volatility," The Journal of Real Estate Finance and Economics, Springer, vol. 33(1), pages 5-18, August.
    13. Davidson, Russell & MacKinnon, James G, 1981. "Several Tests for Model Specification in the Presence of Alternative Hypotheses," Econometrica, Econometric Society, vol. 49(3), pages 781-793, May.
    14. Miyajima, Hideaki & Yafeh, Yishay, 2007. "Japan's banking crisis: An event-study perspective," Journal of Banking & Finance, Elsevier, vol. 31(9), pages 2866-2885, September.
    15. James C. Brau & Andrew Holmes, 2006. "Why Do REITs Repurchase Stock? Extricating the Effect of Managerial Signaling in Open Market Share Repurchase Announcements," Journal of Real Estate Research, American Real Estate Society, vol. 28(1), pages 1-24.
    16. Order, Robert Van, 2006. "A Model of Financial Structure and Financial Fragility," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(3), pages 565-585, April.
    17. Shaffer Brian & Ostas Daniel T., 2001. "Exploring the Political Economy of Consumer Legislation: The Development of Automobile Lemon Laws," Business and Politics, De Gruyter, vol. 3(1), pages 1-13, April.
    18. Campbell, Sean D. & Davis, Morris A. & Gallin, Joshua & Martin, Robert F., 2009. "What moves housing markets: A variance decomposition of the rent-price ratio," Journal of Urban Economics, Elsevier, vol. 66(2), pages 90-102, September.
    19. Slottje, Daniel J. & Millimet, Daniel L. & Buchanan, Michael J., 2007. "Econometric analysis of copyrights," Journal of Econometrics, Elsevier, vol. 139(2), pages 303-317, August.
    20. Shaffer, Brian & Ostas, Daniel T., 2001. "Exploring the Political Economy of Consumer Legislation: The Development of Automobile Lemon Laws," Business and Politics, Cambridge University Press, vol. 3(01), pages 65-76, April.
    21. Richard D. Evans & Phillip T. Kolbe, 2005. "Homeowners? Repeat-Sale Gains, Dual Agency and Repeated Use of the Same Agent," Journal of Real Estate Research, American Real Estate Society, vol. 27(3), pages 267-292.
    22. Thomas W. Gilligan, 2004. "Lemons and Leases in the Used Business Aircraft Market," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 1157-1186, October.
    23. John D. Benjamin & Peter T. Chinloy, 2000. "Pricing, Exposure and Residential Listing Strategies," Journal of Real Estate Research, American Real Estate Society, vol. 20(1), pages 62-74.
    24. James J. Heckman & Hidehiko Ichimura & Petra Todd, 1998. "Matching As An Econometric Evaluation Estimator," Review of Economic Studies, Oxford University Press, vol. 65(2), pages 261-294.
    25. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
    26. Sascha O. Becker & Andrea Ichino, 2002. "Estimation of average treatment effects based on propensity scores," Stata Journal, StataCorp LP, vol. 2(4), pages 358-377, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Spenser J. Robinson & Andrew R. Sanderford, 2016. "Green Buildings: Similar to Other Premium Buildings?," The Journal of Real Estate Finance and Economics, Springer, vol. 52(2), pages 99-116, February.
    2. Andres Jauregui & Alan Tidwell & Diane Hite, 2017. "Sample Selection Approaches to Estimating House Price Cash Differentials," The Journal of Real Estate Finance and Economics, Springer, vol. 54(1), pages 117-137, January.
    3. K. W. Chau & Lennon H. T. Choy, 2011. "Let the Buyer or Seller Beware: Measuring Lemons in the Housing Market under Different Doctrines of Law Governing Transactions and Information," Journal of Law and Economics, University of Chicago Press, vol. 54(S4), pages 347-365.
    4. Seshimo, Hiroyuki, 2014. "Adverse selection versus hold up: Tenure choice, tenancy protection and equilibrium in housing markets," Regional Science and Urban Economics, Elsevier, vol. 48(C), pages 39-55.
    5. Lee, Sanghoon & Ries, John & Somerville, C. Tsuriel, 2013. "Repairs under imperfect information," Journal of Urban Economics, Elsevier, vol. 73(1), pages 43-56.
    6. repec:eee:resene:v:50:y:2017:i:c:p:1-14 is not listed on IDEAS
    7. repec:eee:finsta:v:31:y:2017:i:c:p:167-185 is not listed on IDEAS
    8. Van Vliet, Olaf & Been, Jim & Caminada, Koen & Goudswaard, Kees, 2011. "Pension reform and income inequality among the elderly in 15 European countries," MPRA Paper 32940, University Library of Munich, Germany.

    More about this item

    Keywords

    Property Condition Disclosure; Housing Price Index; Propensity Score Matching; Event Study;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:uct:uconnp:2008-39. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark McConnel). General contact details of provider: http://edirc.repec.org/data/deuctus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.