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How do assessed values affect the transaction prices of homes?

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Listed:
  • Fischer, Marcel
  • Hauf, Patrick
  • Stehle, Simon

Abstract

Property taxes are commonly levied as a percentage of a home's assessed value (AV). AVs should affect home prices through two opposing channels. On the one hand, an unexpected increase in AV implies higher tax payments, which should hurt a home's selling price (tax channel). On the other hand, the increase should have a positive effect since AVs serve as reference prices (anchoring channel). In a quasi-experimental setting exploiting geographic variations in AV-publication dates and reassessment frequencies, we find that a higher AV leads to a lower transaction price, indicating that the tax channel prevails. Our results thus suggest an exacerbation of previously documented inequities caused by taxation.

Suggested Citation

  • Fischer, Marcel & Hauf, Patrick & Stehle, Simon, 2023. "How do assessed values affect the transaction prices of homes?," arqus Discussion Papers in Quantitative Tax Research 293, arqus - Arbeitskreis Quantitative Steuerlehre.
    • Handle: RePEc:zbw:arqudp:343577
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    References listed on IDEAS

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    1. William C. Goolsby, 1997. "Assessment Error in the Valuation of Owner-Occupied Housing," Journal of Real Estate Research, American Real Estate Society, vol. 13(1), pages 33-46.
    2. William Goolsby, 1997. "Assessment Error in the Valuation of Owner-Occupied Housing," Journal of Real Estate Research, Taylor & Francis Journals, vol. 13(1), pages 33-45, January.
    3. David Genesove & Christopher Mayer, 2001. "Loss Aversion and Seller Behavior: Evidence from the Housing Market," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(4), pages 1233-1260.
    4. Michael Bailey & Ruiqing Cao & Theresa Kuchler & Johannes Stroebel, 2018. "The Economic Effects of Social Networks: Evidence from the Housing Market," Journal of Political Economy, University of Chicago Press, vol. 126(6), pages 2224-2276.
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    Keywords

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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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