Loss Aversion and Seller Behavior: Evidence from the Housing Market

42 Pages Posted: 8 Mar 2001 Last revised: 5 Oct 2001

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: March 2001

Abstract

Data from downtown Boston in the 1990s show that loss aversion determines seller behavior in the housing market. Condominium owners subject to nominal losses 1) set higher asking prices of 25-35 percent of the difference between the property's expected selling price and their original purchase price; 2) attain higher selling prices of 3-18 percent of that difference; and 3) exhibit a much lower sale hazard than other sellers. The list price results are twice as large for owner-occupants as investors, but hold for both. These findings are consistent with prospect theory and help explain the positive price-volume correlation in real estate markets.

Suggested Citation

Genesove, David and Mayer, Christopher J., Loss Aversion and Seller Behavior: Evidence from the Housing Market (March 2001). NBER Working Paper No. w8143. Available at SSRN: https://ssrn.com/abstract=262098

David Genesove (Contact Author)

Hebrew University of Jerusalem - Department of Economics ( email )

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

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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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