The Impact of TOM on Prices in the US Housing Market

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Abstract

Search theory shows that real property prices and marketing durations are simultaneously determined and positively related. Yet, empirical studies find positive, negative, and insignificant parameter estimates on the time-on-the-market (TOM) variable in price models. Using a dataset well suited to the research question, this article investigates reasons for the divergence between the theoretical and empirical results. Our test equations examine the quality of instrumental variables, severe overpricing, atypicality, structure quality, loss aversion, market tightness as well as measures unique to our data such as sellers’ income levels, reasons for sale, and urgency. We find that weak instrumental variables account for the varied empirical relations between transaction prices and TOM.

Keywords

Time on the market Instrumental variables Omitted variables Simultaneity Urgency Income Reasons for sale 

JEL Classification

R31 

Notes

Acknowledgements

Hayunga gratefully acknowledges financial support from the Terry-Sanford Research Award. We thank the National Association of Realtors for the data.

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Department of Insurance, Legal Studies, and Real Estate, Terry College of BusinessUniversity of GeorgiaAthensUSA
  2. 2.LREC Endowed Chair of Real Estate, Department of Finance, E.J. Ourso College of BusinessLouisiana State UniversityLouisianaUSA

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