Competing Selling Strategies in the Housing Market

Journal of Real Estate Finance and Economics

33 Pages Posted: 8 Jul 2020

See all articles by Ping Cheng

Ping Cheng

Florida Atlantic University - Finance

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

Date Written: May 17, 2020

Abstract

Due to the heterogeneous nature of real estate assets, housing market is characterized by a sequential search and seller's optimal strategies. This paper provides a side-by-side performance comparison of the two competing stopping rules (i.e., the reservation rule and the number rule) in the housing market. It demonstrates that the selling strategies by these two stopping rules are not mutually exclusive, and the optimal choice of the two strategies varies over market conditions. Our analyses reveal clear evidence that no strategy consistently outperforms the other under all market conditions. Therefore, a single selling strategy is likely to result in suboptimal selling outcomes, and the widely-used reservation rule in academic research is likely to result in biased findings. Furthermore, we identify the explicit impact of several supply and demand factors on the optimal trading outcome and provide rich insights into optimal selling strategies in the housing market.

Suggested Citation

Cheng, Ping and Lin, Zhenguo and Liu, Yingchun, Competing Selling Strategies in the Housing Market (May 17, 2020). Journal of Real Estate Finance and Economics, Available at SSRN: https://ssrn.com/abstract=3626761

Ping Cheng

Florida Atlantic University - Finance ( email )

777 Glades Rd
Boca Raton, FL 33431
United States
561-297-3456 (Phone)
561-297-3686 (Fax)

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

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