Motivated Sellers in the Housing Market

Cemil Selcuk

No E2010/2, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: We present a search-and-matching model of the housing market where potential buyers' willingness to pay is private information and sellers may become desperate as they are unable to sell. A unique steady state equilibrium exists where desperate sellers offer sizeable price cuts and sell faster. If the number of distressed sales rises then even relaxed sellers are forced to lower their prices. Buyers, on the other hand, become more selective and search longer for better deals. The model yields a theoretical density function of the time-to-sale, which is positively skewed and may be hump-shaped. These results are consistent with recent empirical findings.

Keywords: housing; private information; random search; motivated sellers (search for similar items in EconPapers)
JEL-codes: D39 D49 D83 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2010-03
New Economics Papers: this item is included in nep-cta, nep-dge and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:cdf:wpaper:2010/2

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