Search and Liquidity in Single‐Family Housing

Fred A. Forgey, Ronald C. Rutherford and Thomas M. Springer

Real Estate Economics, 1996, vol. 24, issue 3, 273-292

Abstract: A two‐stage least squares model of housing prices is estimated with data collected from 3358 single‐family home transactions. The results provide evidence for an optimal marketing period and indicate that a liquidity premium is priced in single‐family home sales. Consistent with the hypothesis derived from economic search models, the model shows higher selling prices for houses having longer expected marketing periods. The model also shows a price premium for houses that sell faster than expectations. This effect supports the concept that liquidity is a value‐enhancing characteristic.

Date: 1996
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