Home Price, Time-on-Market, and Seller Heterogeneity under Changing Market Conditions

37 Pages Posted: 28 Jan 2009 Last revised: 12 Feb 2011

See all articles by Ping Cheng

Ping Cheng

Florida Atlantic University - Finance

Zhenguo (Len) Lin

Florida International University (FIU) - Hollo School of Real Estate

Yingchun Liu

Dept. of Finance, Insurance, Real Estate and Law, University of North Texas

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Date Written: November 27, 2008

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".

Keywords: Home Price, Time-on-market, Seller Heterogeneity, Housing Market Conditions

Suggested Citation

Cheng, Ping and Lin, Zhenguo and Liu, Yingchun, Home Price, Time-on-Market, and Seller Heterogeneity under Changing Market Conditions (November 27, 2008). Journal of Real Estate Finance and Economics, Vol. 41, 272-293, 2010, Available at SSRN: https://ssrn.com/abstract=1333862

Ping Cheng

Florida Atlantic University - Finance ( email )

777 Glades Rd
Boca Raton, FL 33431
United States
561-297-3456 (Phone)
561-297-3686 (Fax)

Zhenguo Lin (Contact Author)

Florida International University (FIU) - Hollo School of Real Estate ( email )

Miami, FL 33199
United States
3057799248 (Phone)

Yingchun Liu

Dept. of Finance, Insurance, Real Estate and Law, University of North Texas ( email )

1155 Union Circle #305340
Denton, TX 76203
United States

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