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The relationship between property transaction prices, turnover rates and buyers' and sellers' reservation price distributions
KTH, School of Architecture and the Built Environment (ABE), Real Estate and Construction Management, Building and Real Estate Economics.ORCID iD: 0000-0001-5574-0522
KTH, School of Architecture and the Built Environment (ABE), Real Estate and Construction Management, Building and Real Estate Economics. National Board of Housing, Building and Planning.
(English)Manuscript (preprint) (Other academic)
Abstract [en]

This paper analyzes the relationship between movements in property transaction prices and movements in the underlying reservation price distributions of buyers and sellers and how these movements are linked to time varying turnover rate. A main conclusion in previous research is that transaction prices lag changes in buyers’ reservation price distribution and that an index tracking transaction prices is less volatile than an index tracking buyer reserves. We show that our less restrictive model of search and price formation reverses the volatility result in previous papers in realistic scenarios, i.e., transaction prices may be more volatile than underlying buyer reserves. We model transaction prices and turnover rates as functions of the moments of buyers’ and sellers’ reservation price distributions, the search intensity and the average bargaining power among buyers and sellers respectively. We derive the probability density function of transaction prices as a function of these parameters and hence a Maximum-likelihood estimator of the parameters, which serves as a new method of estimating indexes tracking movements in reservation price distributions from transaction data. We perform simulations where we show that the Maximum-likelihood estimator works as intended.

National Category
Social Sciences
Research subject
Real Estate and Construction Management
Identifiers
URN: urn:nbn:se:kth:diva-262716OAI: oai:DiVA.org:kth-262716DiVA, id: diva2:1362281
Note

Working Paper 2019:02

QC 20190405

Available from: 2019-10-18 Created: 2019-10-18Bibliographically approved

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fulltext(582 kB)8 downloads
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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf