Is the behavior of sellers with expected gains and losses relevant to cycles in house prices?

We examine anchoring to the price paid at purchase during an important cycle in Connecticut, 2000–2017 which is similar to cycles in many other states. Our repeat sales model, which mitigates endogeneity and unobserved heterogeneity, provides robust estimates of negotiated price premiums (discounts) of sellers with expected losses (expected gains). Our model bridges from individual to aggregate price responses, and it supports new stylized facts about housing market cycles. Results suggest that anchoring was associated with reductions in observed changes in house prices during the boom (2004–2006) as sellers with gains dominate with their price discounts, and with reduced price declines during the bust (2007–2012) when the behavior of those with losses becomes important. Additional results making minimal model assumptions suggest that loss behavior is statistically significant and important at turning points, i.e., during the transition from a boom to a bust and vice versa. Double mean differences suggest that those with losses used the mild recovery as an opportunity to realize losses at reduced premiums after long delays.