Heterogeneous Real Estate Agents and the Housing Cycle

Sophia Gilbukh and Paul Goldsmith-Pinkham

No 31683, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The real estate market is highly intermediated, with 90 percent of buyers and sellers hiring an agent to help them transact a house. However, low barriers to entry and fixed commission rates result in a market where inexperienced intermediaries have a large market share, especially following house price booms. Using rich micro-level data on 8.5 million listings and a novel instrumental variables research design, we first show that houses listed for sale by inexperienced real estate agents have a lower probability of selling, and this effect is strongest during the housing bust. We then study the aggregate implications of the distribution of agents' experience on housing market liquidity by building a dynamic entry and exit model of real estate agents with aggregate shocks. We find that 3.7 more listings would have been sold in a flexible commission equilibrium. It would require a six-fold increase in entry costs for real estate agents to achieve this level of liquidity within the fixed commission framework.

JEL-codes: G5 R3 (search for similar items in EconPapers)
Date: 2023-09
New Economics Papers: this item is included in nep-ure
Note: CF IO
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Related works:
Working Paper: Heterogeneous Real Estate Agents and the Housing Cycle (2020)
Working Paper: Heterogeneous Real Estate Agents and the Housing Cycle (2019)
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