The Impact of Property Condition Disclosure Laws on Housing Prices: Evidence from an Event Study Using Propensity Scores

Posted: 27 Jun 2012

See all articles by Anupam Nanda

Anupam Nanda

University of Reading - School of Real Estate & Planning, Henley Business School

Stephen L. Ross

University of Connecticut - Department of Economics

Date Written: June 27, 2012

Abstract

We examine the impact of seller's Property Condition Disclosure Laws on residential real estate values. A disclosure law may address the information asymmetry in housing transactions shifting risk from buyers and brokers to the sellers and raising housing prices as a result. We combine propensity score techniques from the treatment effects literature with a traditional event study approach. We assemble a unique set of economic and institutional attributes for a quarterly panel of 291 US Metropolitan Statistical Areas (MSAs) across 50 US States spanning 21 years from 1984 to 2004. The study finds that the average sales price of houses in a metropolitan area increases by an additional three to four percent over a four year period if the state adopts a Property Condition Disclosure Law, which is consistent with approximately a 19 basis point or 6.4 percent reduction in the risk premium associated with purchasing owner-occupied housing, When we compare the results from parametric and semi-parametric (propensity score) event analyses, we find that the semi-parametric analysis generates moderately larger estimated effects of the law on housing prices.

Keywords: Property condition disclosure, Housing price index, Propensity score matching, Event study

Suggested Citation

Nanda, Anupam and Ross, Stephen L., The Impact of Property Condition Disclosure Laws on Housing Prices: Evidence from an Event Study Using Propensity Scores (June 27, 2012). Journal of Real Estate Finance and Economics, Vol. 45, No. 1, 2012, Available at SSRN: https://ssrn.com/abstract=2093558

Anupam Nanda (Contact Author)

University of Reading - School of Real Estate & Planning, Henley Business School ( email )

Whiteknights
Reading, Berkshire RG6 6AH
United Kingdom

Stephen L. Ross

University of Connecticut - Department of Economics ( email )

365 Fairfield Way, U-1063
Storrs, CT 06269-1063
United States
860-486-3533 (Phone)
860-486-4463 (Fax)

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