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Home Price, Time-on-Market, and Seller Heterogeneity under Changing Market ConditionsPing ChengFlorida Atlantic University - Department of Industry Studies Zhenguo LinCalifornia State University, Fullerton - Department of Finance Yingchun LiuLaval University - Department of Finance, Insurance and Real Estate November 27, 2008 Journal of Real Estate Finance and Economics, Vol. 41, 272-293, 2010 Abstract: This paper develops a formal model to examine the effect of changing market conditions and individuals' selling constraints on expected selling price and time-on-market. Using the concept of Relative Liquidity Constraint (RLC) - a stochastic variable that captures the randomness of future individual constraints and market conditions - the study presents the first ex ante analysis that extends the investigation of the issue of seller heterogeneity to the point of the buying decision, that is, from the perspective of the buyer's (future seller's) point of view. We show that seller constraint, as well as the uncertainty of such a constraint, significantly depresses the expected selling price and increases risk. Our closed-form formulas provide a set of simple quantitative tools that enable buyers and sellers to adjust the "market average" to their ex ante "individual expectations".
Number of Pages in PDF File: 37 Keywords: Home Price, Time-on-market, Seller Heterogeneity, Housing Market Conditions Accepted Paper SeriesDate posted: January 28, 2009 ; Last revised: February 12, 2011Suggested CitationContact Information
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