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Please note that all times are shown in the time zone of the conference. The current conference time is: 13th Aug 2022, 10:25:09am IST
1University of Georgia; 2UC Irvine; 3USC; 4Fannie Mae;
Existing studies generally document large price discounts for foreclosures and short sales, implying large inefficiencies in real estate markets. We consider an alternative approach that leverages the expertise and local market knowledge of residential real estate appraisers. Our approach deals with omitted property characteristics and locational factors that likely plague existing estimates of foreclosure and short sale discounts. Using traditional approaches on a large nationally representative sample of residential real estate appraisals, we find discounts of approximately 20%, consistent with the existing literature. However, after implementing our methodology the foreclosure and short sale discounts are drastically reduced to roughly 5%.
Deal or no Deal? The Time-on-Market, Time-to-Close, and Residential Transaction Prices
Francke, Marc; Dröes, Martijn; Wang, Yumei
University of Amsterdam, Netherlands, The;
Unlike many other major asset classes, when buying a physical asset like real estate, the date of the transfer of ownership differs from the date of purchase. This period between buying and transfer, the time-to-close, is necessary for the buyer to arrange financing, and, in case of for example residential real estate, for the seller to move to his next home. Using a micro-economic model, we hypothesize that the marginal effect of the time-to-close on residential transaction prices is positive, as a seller wants compensation for losses in expected house price appreciation, potential interest payments of a bridge loan, and any short-term rental costs over the time-to-close period. This result stands in contrast to the effect of what is more commonly known as the time-on-market. Using a combination of administrative and realtor data from the Netherlands over the period 2006-2016, we examine the impact of the time-to-close on residential transaction prices. In line with our theoretical framework, we find a positive effect of the time-to-close on transaction prices and a negative effect for the time-on-market. The opposite effect of the time-to-close and time-on-market illustrates the importance of separating their effects in a price equation.
Measuring Local Determinants of Herding and Reverse Herding Behaviour in US Housing Markets
Pollock, Matthew Alexander1; Mori, Masaki2; Wu, Yi1
1University of Reading, United Kingdom; 2Ecole hôtelière de Lausanne, Switzerland;
This study examines the economic and real estate characteristics that determine local variation in observed herding and reverse herding behaviour in US housing markets.
We find that house price growth, more educated populations and more elastic land supply create an overconfident context for reverse herding, and that a higher price-to-income ratio is a strongly significant predictor of herding. We also find that higher levels of homeownership are associated with rational market outcomes.
Our results are consistent and robust across linear and non-linear estimations.
As housing markets possess unique characteristics such as local variation and information asymmetries, they exhibit irrational behaviour that differs markedly from equity markets, hence motivating the equal importance we attach to the less researched concept of reverse herding. We also examine which characteristics broadly determine irrational behaviour, as well as the specific herding and reverse herding behaviour.