How Perception Affects House Prices: Evidence from Failed Auctions
54 Pages Posted: 20 Dec 2022 Last revised: 31 Jan 2025
There are 2 versions of this paper
How Perception Affects House Prices: Evidence from Failed Auctions
UNSW Business School Research Paper Forthcoming
Number of pages: 54
Posted: 20 Dec 2022
Last Revised: 31 Jan 2025
You are currently viewing this paper
Downloads
140
The Stench of Failure: How Perception Affects House Prices
NBER Working Paper No. w30760
Number of pages: 50
Posted: 19 Dec 2022
Last Revised: 20 Jul 2023
Downloads
17
Date Written: December 7, 2022
Abstract
In the Australian real estate market, about a third of properties are sold at auction. Properties that fail auctions sell later for a 1.3% discount. Consistent with a causal channel, the effect holds with property-level fixed effects and when auction failure is instrumented by adverse weather (rain). Prices cluster just below round numbers, and the discount fades over time, inconsistent with our effects reflecting unobserved property characteristics. The evidence suggests that there are behavioral factors affecting potential buyers’ willingness to pay.
Keywords: Auctions, Property Markets, Auction Failure, Stigma
JEL Classification: D44, D10, G40
Suggested Citation: Suggested Citation
Cortés, Kristle Romero and Singh, Mandeep and Solomon, David H. and Strahan, Philip E., How Perception Affects House Prices: Evidence from Failed Auctions (December 7, 2022). UNSW Business School Research Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=4296494 or http://dx.doi.org/10.2139/ssrn.4296494
Do you have a job opening that you would like to promote on SSRN?
Feedback
Feedback to SSRN