The Review of Economics and Statistics Vol. 107 No. 4 2025
Auctions and Negotiations in Housing Price Dynamics
Abstract
We shed light on housing price inertia by investigating how the home-sale mechanism affects housing price dynamics. Using Australian data, we find that auction prices forecast better and display less momentum than negotiated prices. These findings are robust to alternative price measurements and different sample selection corrections. Motivated by microtheory that predicts different weights for buyer and seller values in auction and negotiated prices, we decompose housing prices into two diffusion processes and interpret them as buyer value and seller value, respectively. The seller value updates much more slowly, which could be an important driver of housing price inertia.
- DOI
- 10.1162/rest_a_01325
- Volume
- 107
- Issue
- 4
- Pages
- 1074-1085
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref