The effect of an adjustment in the list price on the final outcome of the housing markets Ksenija Bogosavljevic, Steven B.Caudill, and Anita K. Pennathur Florida Atlantic University

Ksenija Bogosavljevic, Steve Caudill and Anita Pennathur

ERES from European Real Estate Society (ERES)

Abstract: Setting the list price when selling a house is generally a finely-honed decision for both the seller and the real estate broker. An accurate initial price provides the optimal balance between setting the price that is low enough to attract several buyers while pricing it high enough to receive what she believes is the true value of the property. Yet, the initial pricing decision is not set in stone. A seller may set the price too low, and then realize that she has underpriced, given the interest shown by potential buyers of her property. On the other hand, she may have overestimated the value of her property, and her listing may not have much activity. In either scenario, the seller has the option to change the price to reset to the market interest, either by increasing or decreasing the initial list price. Our study examines the influence of price fluctuations on the results of sales transactions. We analyze a sample of transactions that took place in Clayton, Cobb, DeKalb, Fayette, Forsyth, Fulton, Henry, and Rockdale counties from 2016 to 2018. Our analysis reveals that 27% of transactions display a drop in price, while 5% show an increase in price relative to the initial listing price. We apply Inverse Probability Regression Adjustment to estimate the average causal effect of a binary treatment (Change in Price) on sales outcomes, specifically sales price and time on the market. Our analysis indicates that promptly reducing the price of an overvalued property will lead to a higher selling price and shorter marketing time.

Keywords: causal effect; Housing Markets; list price; time on the market (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2024-01-01
New Economics Papers: this item is included in nep-ure
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