Equity and Time to Sale in the Real Estate Market

32 Pages Posted: 16 May 2000  

David Genesove

Hebrew University of Jerusalem - Department of Economics; Centre for Economic Policy Research (CEPR)

Christopher J. Mayer

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Date Written: September 1994

Abstract

Recent research has proposed a pro-cyclical link between sales volume and prices in the real estate market through changes in the equity of existing homeowners. This article uses data from the Boston condominium market to show that owners with high loan-to-value ratios take longer to sell their properties than owners with low loan-to- value ratios. Properties with high loan-to-value ratios are listed at higher asking prices; when sold, they receive higher prices than units with less debt. Together, these results are consistent with a search model in which owners 'constrained' by large amounts of debt set a higher reservation price than 'unconstrained' owners, accepting a lower probability of sale in exchange for a higher final sales price.

Suggested Citation

Genesove, David and Mayer, Christopher J., Equity and Time to Sale in the Real Estate Market (September 1994). NBER Working Paper No. w4861. Available at SSRN: https://ssrn.com/abstract=227955

David Genesove (Contact Author)

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Hebrew University of Jerusalem - Department of Economics ( email )

Mount Scopus
Jerusalem, 91905
Israel
+972 2 588 3128 (Phone)
+972 2 581 6071 (Fax)

Christopher J. Mayer

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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