Search Benefit in Housing Markets: An Inverted U-Shaped Price and TOM Relation

Real Estate Economics, Forthcoming

51 Pages Posted: 18 Apr 2017 Last revised: 11 Sep 2017

See all articles by Xin He

Xin He

Surrey International Institute, Dongbei University of Finance and Economics

Zhenguo (Len) Lin

Florida International University (FIU) - Hollo School of Real Estate

Yingchun Liu

Dept. of Finance, Insurance, Real Estate and Law, University of North Texas

Michael Seiler

College of William and Mary

Multiple version iconThere are 2 versions of this paper

Date Written: September 1, 2017

Abstract

The nature of the relationship between a property’s selling price and its marketing time in the housing market remains an open question to date, despite almost 40 years of inquiry and hundreds of regressions conducted on various data sources. This study attempts to settle the long-standing open question by examining the issue from a new perspective. We demonstrate that the true price-TOM relationship should be nonlinear and characterized by an inverted U-shaped curve wherein the selling price increases with TOM up to a certain threshold, reflective of a positive exposure effect and decreases thereafter to reflect a negative stigma effect. This relationship is borne out in an empirical analysis using a large sample of home sales from the Hampton Roads, Virginia metropolitan area during an extended period of time. We then formulate hypotheses about the benefit of search by home sellers, which are subsequently confirmed by the empirical findings.

Keywords: Search Benefit; Housing Prices; Time-on-market

JEL Classification: E3; O18; R3

Suggested Citation

He, Xin and Lin, Zhenguo and Liu, Yingchun and Seiler, Michael, Search Benefit in Housing Markets: An Inverted U-Shaped Price and TOM Relation (September 1, 2017). Real Estate Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2954241 or http://dx.doi.org/10.2139/ssrn.2954241

Xin He

Surrey International Institute, Dongbei University of Finance and Economics ( email )

217 Jianshan St,
Shahekou
Dalian, Liaoning
China

Zhenguo Lin (Contact Author)

Florida International University (FIU) - Hollo School of Real Estate ( email )

Miami, FL 33199
United States
3057799248 (Phone)

Yingchun Liu

Dept. of Finance, Insurance, Real Estate and Law, University of North Texas ( email )

1155 Union Circle #305340
Denton, TX 76203
United States

Michael Seiler

College of William and Mary ( email )

P.O. Box 8795
Williamsburg, VA 23185
United States

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