The burgeoning role of iBuyers in the housing market

We examine the iBuyers’ business model and their impact on housing markets. We find that iBuyers tend to enter neighborhoods that have more easily priced and homogeneous homes, as price discovery is simpler and more consistent with their pricing algorithm in those areas. iBuyers purchase homes at lower prices than individual owner-occupiers, and this acquisition discount reflects the benefits iBuyers offer to motivated sellers rather than distressed home purchases or unobserved lower-quality housing characteristics. Last, a greater presence of iBuyers results in a higher volume of local housing transactions and encourages more home sellers to sell without listing.     

Dual Agent Distortions in Real Estate Transactions

This article investigates price distortions in dual agent real estate transactions. Consistent with the literature, we find that, on average, dual agent has a null effect on sale price. However, dual agent distortions on sale price emerge after controlling for the ownership of the property. Dual agent is associated with a 6.35% price premium on agent‐owned properties, but a 25.10% price discount on government‐owned properties and a 5.14% discount on bank‐owned properties. In addition, market conditions also play an important role in such price distortions.     

Foreclosure Discount: Definition and Dynamic Patterns

The lack of a consistent definition of foreclosure discount gives rise to discount rates that vary from nonexistent to sizeable across locations and time. We define the foreclosure discount as the discount of the real estate owned (REO) sale price relative to a normal‐sale estimated market value. With a dataset of 1.34 million REO sale transactions, across 16 CBSAs between 2000 and 2012, we find three noteworthy empirical findings. First, a high REO sale concentration in a market increases the foreclosure discount. Second, foreclosure discount is negatively related to recent house‐price appreciation. Third, the often reported high foreclosure discount for lower value properties is likely due to property condition.     

The Effects of Assumption Financing Across Housing Price Categories

This study employs a standard housing valuation model to analyze the capitalization of below-market financing across housing price categories. The study also investigates the effect of secondary financing on housing prices and the effect of the expected holding period on discount capitalization. Using a randomly selected sample of 1981–82 housing transactions the study finds: the discount associated with below-market financing is inversely related to the absolute level of housing prices; secondary financing bears no systematic relationship to housing values; and discount capitalization is inversely related to the expected holding period.     

The Pricing of the Emergent Leasehold (Possessory) Estates of Ghana

The paper develops hedonic analyses of the pricing of leasehold versus freehold estates in Ghana. The motivation of the paper is the passage of Act 267(5) in 1992 that effectively abolished outright sale of stool lands in Ghana. Stool lands are lands controlled by tribal "chiefs." Act 267(5) prohibits the sale of freehold estates for stool lands. There are two important findings in this study. The first is that freeholds tend to attract premium prices relative to leaseholds. This supports the bundle-of-rights argument. The second is that the effect of the 1992 Act is indeed capitalized into land prices because of the relative increase in the supply of leaseholds vis-à-vis freeholds. Specifically, the price of freeholds increased relative to the price of leaseholds after the constitutional event. The study also finds that transactions involving stools and individuals, usually perceived to be associated with litigation risk (or title insecurity) relative to government lands, are sold at a discount. Transactions noted to have a history of litigation are also associated with price discounts. The estimated coefficients on all the variables representing services to the site like water, electricity and access roads are significantly positive, indicating a high demand for such essential services.     

Valuing New Urbanism: The Case of Kentlands

This study assesses the impact of new urbanism on single-family home prices. Specifically, we use Duany and Plater-Zyberk's traditional neighborhood development (TND) of Kentlands and surrounding conventional subdivisions to estimate the premium, if any, that single-family homeowners are willing to pay to reside in a community with new urbanist features. Using data on 2,061 single-family home transactions and several hedonic price models, the empirical evidence reveals that consumers are willing to pay a premium to locate in Kentlands.     

An Analysis of Resolution Trust Corporation Transactions: Auction Market Process and Pricing

This article describes the operations of the Resolution Trust Corporation (RTC), examines the procedures it employs to resolve distressed Savings and Loan scenarios and investigates the pricing of transactions undertaken by the RTC. The RTC has been criticized for allegedly transferring properties to acquirers at "bargain" prices. The transactions involving publicly traded acquirers in RTC sales are examined from an auction theory perspective. Overall, there is little evidence that winning bidders experience stock price gains. There are, however, subsets of bidders for which the outcomes are predominantly negative. The only category of transactions which provide statistically significant gains to acquirers are Insured Deposit Transfers.     

Search and Liquidity in Single-Family Housing

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.     

Urban flight: A short-term phenomenon or long-term trend?

We investigate whether the urban flight from more to less dense locations identified by previous housing studies for the early COVID period is a temporary, pandemic-induced phenomenon, or long-term trend. We focus on the period of 2017–2022, 14,961 single-family home transactions from Southwestern Ontario, and three housing market metrics. Our results for sales price in the early pandemic periods are in line with previous studies. However, our results for sales price in the last pandemic phase (2022), marketing time, and visit activity suggest that the urban flight was a temporary phenomenon characteristic of the early COVID phases.     

To Sell or Not to Sell: Measuring the Heat of the Housing Market

Combining list‐price, sale‐price and time‐on‐the‐market data, we estimate an index that summarizes housing market conditions and that has a direct economic interpretation. The index measures seller's bargaining power in a structural search model of home seller behavior. Structural estimation uncovers an analytical relationship between reduced form coefficients of hedonic and marketing‐time equations and structural parameters. Thus, the index can be estimated using individual‐level or aggregate data. Using housing transactions data from the Washington, D.C., area, we show that index trends coincide with the up and downturns in home appreciation rates and with popular perceptions about the “heat” of the market.     

Estimating the House Foreclosure Discount Corrected for Spatial Price Interdependence and Endogeneity of Marketing Time

Most previous empirical research estimates a greater than 20% discount associated with the sale of foreclosed properties. Under the assumption that the real estate market is somewhat efficient, such a large discount would be counterintuitive. We argue, and empirically show, that the estimated foreclosure coefficients in most of the previous research are upward biased because they do not control for variables such as the physical condition of the property and the relationship between marketing time and price. Accounting for these factors and correcting for two types of spatial price interdependence, our results show that estimates of foreclosure discount reported by previous studies are about one-third higher than the true discount caused by foreclosure per se .     

A Spatiotemporal Solution for the Simultaneous Sale Price and Time‐on‐the‐Market Problem

There exists an important methodological challenge when dealing with sale price and time‐on‐the‐market variables because both variables are simultaneously determined and related to the motivation of the sellers and buyers. Exploiting the fact that transactions occur over space and time, we propose a two‐stage approach based on instrumental variables (IV) built from information collected from previous transactions. The unidirectional temporal property and the fact that other transactions are exogenous from the perspective of a single buyer or seller are exploited to evaluate the effect of the sale price on time‐on‐the‐market, and the effect of time‐on‐the‐market on the sale price. Based on 29,471 transactions occurring in the suburban neighborhood of Montréal (1992‐2000), the results suggest that, everything else being equal, houses staying longer on the market provide negative information to the market, which results in a lower final sale price, while the final sale price is negatively related to time‐on‐the‐market, indicating that houses of better quality (better amenities) stay less time on the market.     

Optimal Pricing Strategy in the Case of Price Dispersion: New Evidence from the Tokyo Housing Market

We adopt a multistage search model, in which the home seller's reservation price is determined by her or his opportunity cost, search cost, discount rate and additional market parameters. The model indicates that a greater dispersion in offer prices leads to higher reservation and optimal asking prices. A unique dataset from the Tokyo condominium resale market enables us to test those modeled hypotheses. Empirical results indicate that a one percentage point increase in the standard deviation of submarket transaction prices results in a two‐tenths of a percent increase in the initial asking price and in the final transaction price. Increases in the dispersion of market prices enhance the probabilities of a successful transaction and/or an accelerated sale.     

A co-ordination model combining incentive scheme and co-ordination policy for a single-vendor-multi-buyer supply chain

Incentive scheme and co-ordination policy are substantial components for the co-ordination of a decentralized supply chain system, but there is little work combining the two components as a single decision model (Li and Wang, 2007). This paper proposes a model which incorporates both incentive and co-ordination issues into a single co-ordination model for a single-vendor multi-buyer supply chain. In the proposed model, the co-ordination is achieved by synchronizing ordering and production cycles while price discount, which is based on the buyers’ order intervals, is used as the incentive to motivate buyers to participate in the co-ordination. While the vendor is benefited from the co-ordination by synchronized cycles, the proposed price discount scheme can guarantee that a buyer’s total relevant cost of co-ordination will be reduced when compared with independent optimization. More importantly, the proposed price discount scheme does not require any cost information from the buyers.     

Smallholder market participation under transactions costs: Maize supply and fertilizer demand in Kenya

This paper assessed the effects of transactions costs—relative to price and non-price factors—on smallholder marketed surplus and input use in Kenya. A selectivity model was used that accounts for the effects of transactions costs, assets, technology, and support services in promoting input use and generating a marketable surplus. Output supply and input demand responses to changes in transactions costs and price and non-price factors were estimated and decomposed into market entry and intensity. The results showed that while transactions costs indeed have significant negative effects on market participation, institutional innovations—such as group marketing—are also emerging to mitigate the costs of accessing markets. Output price has no effect on output market entry and only provides incentives for increased supply by sellers. On the other hand, both price and non-price factors have significant influence on adoption and intensity of input use. Overall, the findings suggest that policy options are available other than price policies to promote input use and marketed surplus. The paper concludes with implications for policy to induce greater input–output market participation among smallholders in Africa.     

Discount Brokerage in Residential Real Estate Markets

Transaction costs are thought to affect asset prices and market liquidity, but the direction and magnitude of these effects continue to be the subject of debate. In the single‐family residential market, discount brokers offer to list a house for a lower price and thus reduce the transaction costs associated with obtaining a match. In this article we obtain empirical estimates of the price and liquidity impact of a seller selecting a discount broker to market a single‐family residential property. The unique data set allows for the identification of residential properties that were listed by a discount brokerage firm. The empirical results confirm the predictions of our theoretical model. Using a sample of 318,221 listings and 243,625 sales, we find that houses listed by discount brokers sell at prices similar to non‐discount brokerage listings, but are less likely to sell, and when they do sell, take approximately three days longer to sell. The results indicate that lower transaction costs do not impact housing prices in this market, but that they are related to asset liquidity.     

Buy High,Sell Low: Corporate Investors in the Office Market

Commercial real estate transactions by corporations are matched with transactions of comparable assets by noninstitutional investors to evaluate outcomes resulting from corporate investment policy. Corporations invest in long‐term assets at a significant premium estimated relative to fundamental values. Divestiture is at a significant discount. Differences in operating performance fail to explain this outcome. Instead, corporate investors value commercial property differently than noninstitutional investors. Valuation differences contribute to overpayment during periods of expansion and liquidation during contraction. Corporate sellers also exhibit a high degree of impatience with significantly reduced marketing periods.     

The Gender Gap in Real Estate Sales: Negotiation Skill or Agent Selection?

This study examines differences in net selling price for residential real estate across male and female agents. A sample of 2,020 home sales transactions from Fulton County, Georgia, are analyzed in a two‐stage least squares, geospatial autoregressive corrected, semi‐log hedonic model to test for gender and gender selection effects. Although agent gender seems to play a role in naïve models, its role becomes inconclusive as variables controlling for possible price and time on market expectations of the buyers and sellers are introduced to the models. Clear differences in real estate sales prices, time on market and agent incomes across genders are unlikely due to differences in negotiation performance between genders or the mix of genders in a two‐agent negotiation. The evidence suggests an interesting alternative to agent performance: that buyers and sellers with different reservation price and time on market expectations, such as those selling foreclosure homes, tend to select agents along gender lines.     

USING RESERVE PRICES TO DETER COLLUSION IN PROCUREMENT COMPETITION*

To enhance our understanding of collusion in procurement settings, this paper quantitatively evaluates how the buyer's choice of a reserve price influences the sustainability of two previously devised collusive schemes. If the buyer does not select its reserve price strategically, then collusion may be sustainable for a wide range of plausible discount factors. However, even mildly sophisticated reserve price selection can dramatically shrink the set of discount factors for which collusion is sustainable. These findings support existing arguments that buyers are vulnerable to collusion, but they also suggest that buyers possess tools that may profitably induce sellers to act competitively.     

Price Premium and Foreclosure Risk

Many previous studies identify loan, property, borrower and environmental factors that impact the probability of foreclosure. Implicit in these studies is the assumption that the property was purchased at fair value. We question this assumption based on several empirical findings regarding property value uncertainty. In contrast to previous research, we explicitly quantify the price premium from a hedonic pricing model. Using a comprehensive database of real estate transactions in Singapore during 1989–2000, we document a price premium associated with properties that are subsequently foreclosed based on actual sales transactions. In addition, we find that the premium paid at purchase significantly increases the probability of foreclosure. These results are robust and continue to hold after controlling for other property-specific factors, time-varying macroeconomic conditions, alternative model specifications and definitions of price premium.