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- Publisher Website: 10.1111/j.1540-6229.2012.00345.x
- Scopus: eid_2-s2.0-84879357152
- WOS: WOS:000320473300006
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Article: Why do sellers hold out in the housing market? An option-based explanation
Title | Why do sellers hold out in the housing market? An option-based explanation |
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Authors | |
Issue Date | 2013 |
Citation | Real Estate Economics, 2013, v. 41, n. 2, p. 384-417 How to Cite? |
Abstract | In the residential housing market, home owners are reluctant to sell in a declining market. We build a model which focuses on the embedded call option associated with home ownership that allows owners to delay the (irreversible) sale. When prices are low, the (opportunity) cost of a sale, i.e., a higher implied gain from a future sale, likely exceeds its immediate trade benefit and an owner is better off waiting for market conditions to improve. The model also highlights the importance of supply conditions: a more constrained supply is associated with a longer delay. Using state-level residential housing data, we find evidence consistent with the model. Transaction volume is increasing (decreasing) in the rental growth rate (volatility) in the cross section; their effects are amplified in areas with low supply elasticities, and in times with low market prices. Overall, this paper provides a rational explanation for delayed trading decisions in the housing market. © 2012 American Real Estate and Urban Economics Association. |
Persistent Identifier | http://hdl.handle.net/10722/309207 |
ISSN | 2023 Impact Factor: 2.0 2023 SCImago Journal Rankings: 1.233 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Qian, Wenlan | - |
dc.date.accessioned | 2021-12-15T03:59:44Z | - |
dc.date.available | 2021-12-15T03:59:44Z | - |
dc.date.issued | 2013 | - |
dc.identifier.citation | Real Estate Economics, 2013, v. 41, n. 2, p. 384-417 | - |
dc.identifier.issn | 1080-8620 | - |
dc.identifier.uri | http://hdl.handle.net/10722/309207 | - |
dc.description.abstract | In the residential housing market, home owners are reluctant to sell in a declining market. We build a model which focuses on the embedded call option associated with home ownership that allows owners to delay the (irreversible) sale. When prices are low, the (opportunity) cost of a sale, i.e., a higher implied gain from a future sale, likely exceeds its immediate trade benefit and an owner is better off waiting for market conditions to improve. The model also highlights the importance of supply conditions: a more constrained supply is associated with a longer delay. Using state-level residential housing data, we find evidence consistent with the model. Transaction volume is increasing (decreasing) in the rental growth rate (volatility) in the cross section; their effects are amplified in areas with low supply elasticities, and in times with low market prices. Overall, this paper provides a rational explanation for delayed trading decisions in the housing market. © 2012 American Real Estate and Urban Economics Association. | - |
dc.language | eng | - |
dc.relation.ispartof | Real Estate Economics | - |
dc.title | Why do sellers hold out in the housing market? An option-based explanation | - |
dc.type | Article | - |
dc.description.nature | link_to_subscribed_fulltext | - |
dc.identifier.doi | 10.1111/j.1540-6229.2012.00345.x | - |
dc.identifier.scopus | eid_2-s2.0-84879357152 | - |
dc.identifier.volume | 41 | - |
dc.identifier.issue | 2 | - |
dc.identifier.spage | 384 | - |
dc.identifier.epage | 417 | - |
dc.identifier.eissn | 1540-6229 | - |
dc.identifier.isi | WOS:000320473300006 | - |