How Many Listings Are Too Many? Agent Inventory Externalities and the Residential Housing Market

37 Pages Posted: 15 Apr 2013 Last revised: 9 Apr 2015

See all articles by Xun Bian

Xun Bian

University of North Texas

Geoffrey K. Turnbull

University of Central Florida

Bennie D. Waller

Longwood University

Scott Wentland

Bureau of Economic Analysis (BEA)

Date Written: April 8, 2015

Abstract

Given the significant role of real estate agents in the housing market, this study examines how agents’ incentives regarding the size of their listing inventories indirectly affect residential home prices and liquidity. The theory shows that taking on additional inventory generates a critical principal agent issue, resulting in the dilution of an agent’s selling effort and, ultimately, creating an externality that adversely impacts housing market outcomes across listings. It remains an empirical question whether diluted sales effort leads to lower prices, longer time on market, or both. The empirical results reveal significant inventory externality effects, as greater agent inventory tends to reduce selling price and substantially reduce liquidity for clients’ properties in this market.

Keywords: residential housing, house prices, house liquidity, principal-agent problem, moral hazard, asymmetric information

JEL Classification: R30, R10, L85

Suggested Citation

Bian, Xun and Turnbull, Geoffrey K. and Waller, Bennie D. and Wentland, Scott, How Many Listings Are Too Many? Agent Inventory Externalities and the Residential Housing Market (April 8, 2015). Available at SSRN: https://ssrn.com/abstract=2250435 or http://dx.doi.org/10.2139/ssrn.2250435

Xun Bian

University of North Texas ( email )

G. Brint Ryan College of Business
1155 Union Circle #311160
Denton, TX 76203
United States
(940) 369-8309 (Phone)

Geoffrey K. Turnbull

University of Central Florida ( email )

4000 Central Florida Blvd
Orlando, FL 32816-1400
United States

Bennie D. Waller (Contact Author)

Longwood University ( email )

201 High Street
Farmville, VA 23909
United States
434-395-2046 (Phone)
434-395-2203 (Fax)

HOME PAGE: http://www.benniewaller.com

Scott Wentland

Bureau of Economic Analysis (BEA) ( email )

1441 L Street NW
Washington, DC 20910
United States

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