Submarket Dynamics of Time to Sale

Abstract

We argue that the rush to apply multiple regression estimation to time on the market (TOM) durations may have led to important details and idiosyncrasies in local housing market dynamics being overlooked. What is needed is a more careful examination of the fundamental properties of time to sale data. The approach promoted and presented here, therefore, is to provide an examination of housing sale dynamics using a step-by-step approach. We present three hypotheses about TOM: (i) there is nonmonotonic duration dependence in the hazard of sale, (ii) the hazard curve will vary both over time and across intraurban areas providing evidence of the existence of submarkets and (iii) institutional idiosyncrasies can have a profound effect on the shape and position of the hazard curve. We apply life tables, kernel-smoothed hazard functions and likelihood ratio tests for homogeneity to a large Scottish data set to investigate these hypotheses. Our findings have important implications for TOM analysis.In the past 30 years, there have been over 20 published studies of time on the market (TOM) for residential properties. The number of papers doubled in the 1980s, 1 compared with the 1970s. 2 The number doubled again in the 1990s, 3 and there is a good chance that the number of papers will double again by the end of the current decade. 4 This bourgeoning of the literature is partly driven by the increasing popularity of survival analysis techniques per se (assisted by their incorporation into popular statistical software packages) and partly because of the emerging availability of suitable housing data. With respect to the second cause, the present study is a case in point: this is the 378 Pryce and Gibb first large-sample published analysis of residential time to sale in the United Kingdom. The only previous United Kingdom-based paper was the very first in the literature (Cubbins (1974), based on 83 sales in Coventry, England). To our knowledge, all other published studies have used U.S. data.We argue that the rush to apply multiple regression estimation to TOM may have led to important details and idiosyncrasies in local market dynamics being overlooked. What is needed is a more careful examination of the fundamental properties of time-to-sale data. The approach promoted and presented here, therefore, is to provide an examination of housing sale dynamics using a stepby-step approach. Kernel-smoothed nonparametric estimates of the aggregate hazard function (complemented by life table analysis and likelihood ratio tests) are applied to different subgroups of housing sales over different time periods. This anatomy of the selling process reveals insights and caveats previously unexamined in the housing literature-results that can inform future analysis of time to sale and related topics.The starting point for our article is that time to sale cannot be analyzed in the same way as other continuous variables. This is because it is a "duration" variable and hence subject to two crucial characteristics: time dependency and censoring. T...

Asymmetric information and list-price reductions in the housing market

“…Indeed, empirical evidence confirms that the probability of sales decreases with time on the market (e.g. De Wit, 2009;Huang and Palmquist, 2001;Pryce and Gibb, 2006;and Zuehlke, 1987). However, withdrawal from the market is not exogenous to selling the house, and empirical analyses should take this into account.…”

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

“…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). Pryce (2011) also finds that the degree of overpricing is positively correlated with market duration.…”

“…Unlike the open outcry auction, the date of a sealed-bid auction in Scotland is not pre-set and is only set when the seller's solicitor receives two or more 'notes of interest' (Pryce & Gibb, 2006;Pryce, 2011). The bids are revealed to the seller after the 'closing date' for offers has elapsed.…”

“…Auction participants submit a bid on the basis of a professional valuation and an 'offers-over' price set by the seller. Pryce and Gibb (2006) state, 'the offers-over price is typically set so that the auction will produce a successful outcome' (p. 380). The asking price is not legally binding, and the reservation price is often not revealed by the seller.…”

Sole agency vs multi‐agency: an investigation of agency practice across England and Wales

“…However, there are only limited studies investigating the relationship between time on market and selling price in the U.K. A few studies in the U.S context show that a lower listing price is not necessarily related to a shorter time on the market (Arnold, 1999) and that time on the market varies more with spatial location and market conditions than it does with property characteristics (Anglin, et al 2003). Pryce and Gibb (2006) analysed the time to sale effects in Glasgow housing market and argue that not only does the marketing time have an impact on selling price but that the timing of sale in relation to wider property cycle for that location is crucial. This may have had an influence on the data relating to the time of the actual responses but as this was not an objective of this research, we did not examine the issues here.…”