Housing Prices and the Optimal Time-on-The-Market Decision

14 Pages Posted: 13 Apr 2011 Last revised: 7 Jun 2011

See all articles by Hazer Inaltekin

Hazer Inaltekin

University of Melbourne

Robert A. Jarrow

Cornell University - Samuel Curtis Johnson Graduate School of Management

Mehmet Saglam

University of Cincinnati - Department of Finance - Real Estate

Yildiray Yildirim

Zicklin School of Business, Baruch College - The City University of New York

Date Written: April 12, 2011

Abstract

This paper provides a model for housing prices based on a seller solving the optimal time-on-the market problem. Given the seller's optimal time-on-the market, analytical expressions are provided for both the expected time-on-the-market and the sales price. These expressions facilitate the computation of comparative statics. Consistent with economic intuition, we show that (i) both the expected time-on-the market and sales price decrease as interest rates increase, (ii) the expected time-on-the market increases and the expected sales price decreases as offer activity declines, and (iii) the expected time-on-the market and expected sales price both increase as the list price increases.

Keywords: Real estate market, Price evolution, Optimal waiting time

Suggested Citation

Inaltekin, Hazer and Jarrow, Robert A. and Saglam, Mehmet and Yildirim, Yildiray, Housing Prices and the Optimal Time-on-The-Market Decision (April 12, 2011). Available at SSRN: https://ssrn.com/abstract=1808018 or http://dx.doi.org/10.2139/ssrn.1808018

Hazer Inaltekin

University of Melbourne ( email )

185 Pelham Street
Carlton, Victoria 3053
Australia

Robert A. Jarrow

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Department of Finance
Ithaca, NY 14853
United States
607-255-4729 (Phone)
607-254-4590 (Fax)

Mehmet Saglam

University of Cincinnati - Department of Finance - Real Estate ( email )

Carl H. Lindner College of Business
Cincinnati, OH 45221
United States
(513) 556-9108 (Phone)

HOME PAGE: http://homepages.uc.edu/~saglammt/

Yildiray Yildirim (Contact Author)

Zicklin School of Business, Baruch College - The City University of New York ( email )

55 Lexington Ave., Box B13-260
New York, NY 10010
United States

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