Nominal loss aversion and equity constraints in house price determination: Empirical evidence in the absence of down-payment constraints

Joep Steegmans and Wolter Hassink

Journal of Housing Economics, 2025, vol. 69, issue C

Abstract: The paper investigates the effects of nominal loss aversion and equity constraints on house prices in a market without down-payment constraints or strategic defaults. Using extensive house transaction data of owner-occupied family homes from the Netherlands in combination with administrative microdata, the results show that the price effect of nominal loss aversion is about twice the size of the effect of negative equity. List price regressions provide evidence that higher transaction prices are obtained by setting higher list prices. Thereby the paper presents new evidence that nominal loss aversion and equity constraints lead to market premiums.

Keywords: Housing market; House prices; Loss aversion; Negative equity (search for similar items in EconPapers)
JEL-codes: D01 D14 G02 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jhouse:v:69:y:2025:i:c:s1051137725000439

DOI: 10.1016/j.jhe.2025.102084

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