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Endogenous Realtor Intermediation and Housing Market Liquidity

Miroslav Gabrovski, Ioannis Kospentaris and Victor Ortego-Marti (victor.ortego-marti@ucr.edu)
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Victor Ortego-Marti: Department of Economics, University of California Riverside

No 202410, Working Papers from University of California at Riverside, Department of Economics

Abstract: This paper develops a housing search model to analyze the role of realtors in fa- cilitating transactions and shaping housing market liquidity. Motivated by the recent landmark settlement between the National Association of Realtors and home sellers’ associations, we contrast two market structures: a directed search equilibrium, where sellers post prices and fees, and a random search equilibrium, where matched agents bargain the terms of trade bilaterally. A comparison between the two models suggests that the settlement may have unintended consequences that lower buyers’ welfare: ran- dom search features 2.5% higher prices, 17% lower sales, and 23% fewer buyers entering the market than the directed search equilibrium. Our results highlight the importance of explicitly considering realtor entry and market liquidity for a comprehensive evalu- ation of housing market reforms.

Keywords: Housing market; Search and matching; Housing Market Liquidity; Directed Search; Random Search (search for similar items in EconPapers)
JEL-codes: E2 E32 E44 G21 R21 R31 (search for similar items in EconPapers)
Date: 2024-11
New Economics Papers: this item is included in nep-dge and nep-ure
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