Price and Time to Sale Dynamics in the Housing Market: the Role of Incomplete Information
نویسنده
چکیده
I propose a stylized model of the house-selling process in which sellers possess incomplete information regarding the state of the housing market. Consistent with the data, the model generates a negative correlation between house prices and time on market. This result is robust to the presence of real estate agents with complete information. I construct a measure of homeowner perceptions of house prices and compare them to market-based house price indices to form a ‘misperceptions index’ for house prices. An increase in homeowners’ perceptions relative to actual prices is associated with a decrease in sales volumes, with price misperceptions explaining over one-fifth of the within-state variation in sales volumes from 2000 to 2010.
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