Loss Aversion and Seller Behaviour: Evidence from the Housing Market

David Genesove and Christopher Mayer

No 2813, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Data from downtown Boston in the 1990s show that loss aversion determines seller behaviour in the housing market. Condominium owners subject to nominal losses: (1) set higher asking prices of 25-35% of the difference between the property?s expected selling price and their original purchase price; (2) attain higher selling prices of 3-18% of that difference; and (3) exhibit a much lower sale hazard than other sellers. The list price results are twice as large for owner-occupants as for investors, but hold for both. These findings are consistent with prospect theory and help explain the positive price-volume correlation in real estate markets.

Keywords: Housing markets; Loss aversion; Prospect theory (search for similar items in EconPapers)
JEL-codes: L10 R21 (search for similar items in EconPapers)
Date: 2001-05
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Citations: View citations in EconPapers (883)

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Journal Article: Loss Aversion and Seller Behavior: Evidence from the Housing Market (2001)
Working Paper: Loss Aversion and Seller Behavior: Evidence from the Housing Market (2001)
Working Paper: Loss Aversion and Seller Behavior: Evidence from the Housing Market
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