Performing (Housing) Markets

Abstract

This paper offers an interpretation of how housing markets work which complements more traditional economic approaches. Building on a wider movement within cultural economy and economic sociology, it considers how (housing) markets are variously performed in the power-filled negotiations of buyers, sellers and market professionals. This is part of a larger undertaking, but here the focus is particularly on the role of legal, financial and information intermediaries in shaping local cultures of property exchange. This is a social rather than economic analysis of housing markets; it is a qualitative rather than a quantitative study. It is designed to shed light on how markets are made, though it might, in the end, change the way they are modelled.

Expectation Adjustment in the Housing Market: Insights from the Scottish Auction System

“…The bid-premium reflects the buyers' preferences that rapidly adjust to the general economic climate, resembling at times the volatility of financial markets. This is consistent with the argument of Smith et al (2006) that housing has been recently regarded as a potential investment, which is implied by the significant shift in consumer behaviour after 2004. In particular, the second phase of price movements illustrates the investment driven mentality of consumers, where the housing-market/-auction participants consistently overbid in expectation of continuously increasing future payoffs.…”

“…However, there are no data to test the effects of different estate agents and whether they are imposing different local market conventions. We also point to the relevant observation of Smith et al (2006) that market agents did not know what potential buyers should offer when the market was experiencing rapid change. Lastly, there is the issue of asking price endogeneity to asking/selling price percentage that cannot be directly addressed given the type of variables of our data set.…”

“…House price inflation in the Scottish housing market in the run-up to 2007 was partly triggered by the perceived investment potential of housing (Smith et al, 2006). Smith et al (2006) have argued that the behaviour of market agents contributed to the significant house price inflation in Edinburgh between 1996 and 2003.…”

“…Smith et al (2006) have argued that the behaviour of market agents contributed to the significant house price inflation in Edinburgh between 1996 and 2003. Market agents did not know what potential buyers should offer when the market was experiencing rapid change.…”

“…Sellers wish to maximise sale price and complete their transaction in as short a time period as possible (Yavas & Yang, 1995). Nonetheless, the role of market agents is important (Smith et al, 2006), having a significant effect on the expectations of the seller and on setting the asking price. The sale probability can also be affected by the length of time the house has been on the market, the distribution of offers and the seller's reservation price (Haurin, 1988;Pryce & Gibb, 2006;Yavas & Yang, 1995;Zuehlke, 1987).…”