What is the role of the asking price for a house?

Lu Han and William Strange

Journal of Urban Economics, 2016, vol. 93, issue C, 115-130

Abstract: This paper considers the role of the asking price in housing transactions both theoretically and empirically. Significant fractions of housing transactions involve sales prices that are either below or above asking price, which might suggest that asking price has limited relevance. However, many housing transactions involve a sales price exactly equal to asking price (a fact that has previously drawn little notice), strongly suggesting that asking price does matter. The paper develops a model where asking price is neither a binding commitment nor a ceiling, yet still directs buyer search and impacts sales price. Using novel survey data, the paper provides empirical evidence consistent with asking price playing a directing role in buyer search. Consistent with theory, this effect is stronger for more atypical houses and in bust markets.

Keywords: Real estate; Housing; Search; Asking price (search for similar items in EconPapers)
JEL-codes: R00 R21 R31 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (36)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:juecon:v:93:y:2016:i:c:p:115-130

DOI: 10.1016/j.jue.2016.03.008

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