HOUSINGNEWS REPORT
MY TAKE
of a home if a focal round number is within the price range over which the bargaining between a buyer and seller occurs, and thus may act as a natural solution to the bargaining process. Another possible influence on housing prices outside of measurable housing characteristics and psychological phenomenon might be differences in bargaining and search costs for buyers and sellers. For example, if a seller is time- constrained and is not able to invest as much time and effort into the bargaining or search process, they may end up selling their house for less than another seller that can invest more time and effort.
A real estate professional armed with this information could then make more informed real estate investment decisions since it could help to predict the value of homes in the market. While the large academic literature that estimates the hedonic price function has done much to further our understanding about the relationship between housing characteristics and housing prices, there is still substantial variation in housing prices that cannot be explained by these models.
housing prices beyond spatial, temporal, and measurable characteristics of homes. One area of research has been to consider potential psychological phenomenon that influence the final sales price of a home. For example, Sydnor, Pope and Pope (2015) document that there are large spikes in the distribution of final negotiated house prices at round numbers, especially those divisible by $50,000 (see figure 5 from their paper and reproduced for convenience below). This work suggests that round numbers can act as “focal points” in the bargaining process. The magnetism of these numbers can influence the final price
Recently economists have begun to explore other features of the housing market that may lead to differences in
Figure 5 - Sales Price Histogram. $375K-$525K. This figure provides a histogram for houses whose final sales prices were between $375,000 and $525,000. The histogram groups final sales prices into $1,000 bins (rounded down).
JUNE 2017
ATTOM DATA SOLUTIONS • P12
Made with FlippingBook Online newsletter