Home Construction Financing and Search Frictions in the Housing Market

Machine Learning Insights: Exploring Key Factors Influencing Sale-to-List Ratio—Insights from SVM Classification and Recursive Feature Selection in the US Real Estate Market

“…The study of the sale-to-list ratio, which reflects the relationship between the final sale price and the original list price, is an important but understudied aspect of the real estate market. While there is a scarcity of literature directly examining the sale-to-list ratio, several studies have explored related concepts such as housing market tightness [8,[27][28][29][30][31], the balance of power between buyers and sellers [8,28,31,32], and the dynamics of supply and demand [33]. One of the few studies that directly examines the sale-to-list ratio is the work by Zhang et al [9] which establishes a robust theoretical framework and provides empirical evidence linking the sale-to-list ratio to housing values and prices.…”

“…The initial list price (LP) directly influences price dynamics and the potential bargaining range, as shown by the work of Bich et al [34] and the theoretical model developed by Ngai and Sheedy [29]. Listing price cuts, captured by the Listing Price Cut (LPC) variable, reflect market responsiveness, pricing accuracy, and seller motivation, as shown by Gabrovski and Ortego-Marti [30], and are associated with housing market tightness. The pricing of new construction, as measured by the new construction sales price (NCSP), may also affect overall market pricing, with Leamer's [35] research suggesting that housing market tightness is a more important driver of new construction prices than other factors.…”

“…Time-related indicators, such as days to pending (DTP) and days to close (DTC), provide insights into market demand and the efficiency of the sales process. Gabrovski and Ortego-Marti's [30] sophisticated search-and-matching framework directly relates the time on the market variable to housing market tightness, while Anenberg and Ringo's [8] and Sklarz's [37] research suggests that slower sales, indicating a less tight market, would inform sellers that they may need to lower prices to achieve a timely sale.…”

“…Useful in predicting the sale-to-list ratio as it reflects the time it takes for a property to attract a buyer, which can indicate market demand and pricing accuracy. Gabrovski and Ortego-Marti's [30] paper provides a sophisticated search-and-matching framework that directly relates the time on the market variable to housing market tightness and other key market conditions. This offers an alternative perspective to the more granular Zillow metrics (i.e., days to pending), while still capturing the overall dynamics of the housing sales process.…”

“…Useful in predicting the sale-to-list ratio as it reflects market responsiveness and pricing accuracy, and can indicate seller motivation and market conditions. Gabrovski and Ortego-Marti [30] provide evidence linking housing market tightness to housing price cuts and reductions. Gabrovski and Ortego-Marti [30] argue that "higher house prices drive entry of investors and lowers market tightness-or alternatively, they post more vacancies for any given number of buyers".…”