House List Prices and Durations in Boom and Bust

23 Pages Posted: 7 Sep 2013

See all articles by Marco Hoeberichts

Marco Hoeberichts

De Nederlandsche Bank - Research Department

Maarten van Rooij

De Nederlandsche Bank; Netspar

Arjen Siegmann

VU University Amsterdam

Date Written: May 30, 2013

Abstract

Housing markets have a large impact on the macro economy. The recovery of house price declines is usually slow, as transactions decline in a slump. In this paper we present new evidence of list price dynamics in up and down markets, using a novel dataset on actual list prices in the Dutch housing market. We study the years 2006-2010 covering a boom as well as a bust period and find evidence of marked differences in list price dynamics. In a strong market, overpricing increases the probability of a list price reduction suggesting a ‘start-high, reduce early’ pricing strategy. In a weak market, overpricing has the opposite effect: overpriced homes are least likely to decrease the list price. This is consistent with reference-dependent pricing strategies for sellers in the housing market. We conjecture that these strategies follow from a reluctance to realize paper losses that becomes more prominent in a declining market.

Keywords: housing market, boom and bust periods, reference point, list prices

JEL Classification: R31, D83, D12, C41, E30

Suggested Citation

Hoeberichts, Marco M. and van Rooij, Maarten and Siegmann, Arjen, House List Prices and Durations in Boom and Bust (May 30, 2013). Available at SSRN: https://ssrn.com/abstract=2321521 or http://dx.doi.org/10.2139/ssrn.2321521

Marco M. Hoeberichts

De Nederlandsche Bank - Research Department ( email )

P.O. Box 98
1000 AB Amsterdam
Netherlands
+31-20-524 2890 (Phone)
+31-20-524 2529 (Fax)

Maarten van Rooij

De Nederlandsche Bank ( email )

P.O. Box 98
Amsterdam, 1000 AB
Netherlands

HOME PAGE: http://www.dnb.nl/en/onderzoek-2/onderzoekers/overzicht-persoonlijke-paginas/dnb150127.jsp

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Arjen Siegmann (Contact Author)

VU University Amsterdam ( email )

De Boelelaan 1105
Dept. of Finance
Amsterdam, NOT IN US OR CANADA 1081 HV
Netherlands
+31205986581 (Phone)

HOME PAGE: http://personal.vu.nl/a.h.siegmann

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