Information, search, and house prices

Turnbull, Geoffrey K.; Sirmans, C. F.

doi:10.1016/0166-0462(93)90046-h

Cited by 120 publications

(85 citation statements)

References 9 publications

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“…Turnbull and Sirmans (1993) offer two explanations for why in-migrants may pay more for housing than local residents: (1) due to travel expenses, in-migrants may have higher search costs, and (2) because they do not have first-hand experience observing unique market conditions over a longer period of time, in-migrants may be less knowledgeable about the local distribution of housing prices than local residents. If local residents perceive the mean price of housing accurately, for instance, whereas in-migrants have a perceived mean price that exceeds the actual mean, then in-migrants will pay more for housing.…”

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confidence: 97%

Information, Search, and House Prices: Revisited

Ihlanfeldt

Mayock

2010

J Real Estate Finan Econ

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Buyers pay different prices for nearly identical homes. One explanation for this is that housing markets are thin, resulting in price bargaining between sellers and buyers. If the relative bargaining power of buyers varies, so will sales prices. One hypothesis is that the relative bargaining strength of buyers coming from outside the local market relative to that of local residents is weak, because distant buyers have high search costs and may know less about the nuances of the local market. Our results, based upon a large number of single-family home transactions from the state of Florida, lend support to this hypothesis. Another related hypothesis is that buyers' price expectations are anchored to prices they were accustomed to at their previous residence. Hence, if they come from high price markets they will tend to pay more for their new home. This hypothesis is also supported by our results.

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confidence: 97%

Information, Search, and House Prices: Revisited

Ihlanfeldt

Mayock

2010

J Real Estate Finan Econ

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“…Earlier studies using housing markets and small samples suggest that there are no price differences associated with distance. For example, Turnbull and Sirmans (1993) use a small sample of housing transactions from Baton Rouge, Louisiana and conclude that there are no price differentials across local (informed) and distant (uniformed) buyers. In contrast to this earlier literature, more recent work on housing prices suggests there are distance effects in housing prices.…”

Section: Background Literaturementioning

confidence: 99%

Search Costs, Behavioral Biases, and Information Intermediary Effects

Ling

Naranjo

Petrova

2016

J Real Estate Finan Econ

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Buyers in commercial real estate markets often pay different prices for comparable properties. We document that distant commercial real estate buyers pay, on average, a premium relative to local buyers, controlling for individual property characteristics as well as time fixed-effects. We test the extent to which the sources of these observed premiums are a product of higher search costs/information asymmetry problems associated with distance (search cost channel) or a result of reference-dependence preference/anchoring based on the price levels in the investors' home market (behavioral biases channel). Our results employing 114,588 industrial, multi-family and office sale transactions during 1997-2011 suggest the observed price premiums are explained by distant investors who face higher search costs and are at an information disadvantage compared to investors located in closer proximity to the property. In contrast, anchoring plays a more muted role in explaining the observed premiums. These results are robust to econometric techniques that control for potential unobserved property characteristics that are correlated with investor attributes. We also test the extent to which informational intermediaries affect the observed premiums and find that the use of a broker increases the acquisition prices of buyers and decreases the disposition prices of sellers. This result is consistent with the incentive real estate agents have to convince sellers to dispose of their properties too quickly and to convince buyers to search less and therefore pay higher prices.

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“…Haurin (1988) used an optimal stopping rule strategy to study seller behaviour. Turnbull and Sirmans (1993) showed that the housing market was efficient to protect the less informed buyers from paying more once the physical conditions, location and other property characteristics had been controlled. The discount which accounted for the bargaining power was not significantly different between first-time and repeated buyers.…”

Section: Introductionmentioning

confidence: 99%