Housing Prices and the Optimal Time-on-The-Market Decision
14 Pages Posted: 13 Apr 2011 Last revised: 7 Jun 2011
Date Written: April 12, 2011
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
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