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On the role of public price information in housing markets

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  • Eerola, Essi
  • Lyytikäinen, Teemu

Abstract

This paper studies the impact of disclosing detailed house price information on the functioning of the housing market. We first study the effects of increased information on market outcomes in a theoretical framework where sellers are uncertain about the demand their house faces. We argue that increased information is more valuable to sellers who underestimate the value of their house than to sellers who overestimate the value of their house. Because of this asymmetry, house price information leads to higher prices. If more detailed information also improves matching in the housing market, higher prices may be accompanied by shorter time on the market. In the empirical part of the paper, we utilize a Finnish policy intervention to estimate these effects. In 2007, a website with detailed information about individual housing transactions in part of the country was opened. Differences-in-Differences estimation results suggest that increased information on past transactions led to higher prices and faster sales.

Suggested Citation

  • Eerola, Essi & Lyytikäinen, Teemu, 2015. "On the role of public price information in housing markets," Regional Science and Urban Economics, Elsevier, vol. 53(C), pages 74-84.
    • Handle: RePEc:eee:regeco:v:53:y:2015:i:c:p:74-84
    DOI: 10.1016/j.regsciurbeco.2015.05.006
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    Cited by:

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    2. Essi Eerola & Niku Maattanen, 2018. "Borrowing constraints and housing market liquidity," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 27, pages 184-204, January.
    3. Ben-Shahar, Danny & Golan, Roni, 2022. "Price dispersion and time-on-market in the housing market," Journal of Housing Economics, Elsevier, vol. 58(PB).
    4. Astrid Pennerstorfer & Dieter Pennerstorfer, 2018. "How Small are Small Markets? Location Choice and Geographical Market Size for Child Care Services," Economics working papers 2018-14, Department of Economics, Johannes Kepler University Linz, Austria.
    5. Gibbons, Steve & Overman, Henry G. & Patacchini, Eleonora, 2015. "Spatial Methods," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 115-168, Elsevier.
    6. Daniel Broxterman & Tingyu Zhou, 2023. "Information Frictions in Real Estate Markets: Recent Evidence and Issues," The Journal of Real Estate Finance and Economics, Springer, vol. 66(2), pages 203-298, February.
    7. Nan Liu, 2021. "Market buoyancy, information transparency and pricing strategy in the Scottish housing market," Urban Studies, Urban Studies Journal Limited, vol. 58(16), pages 3388-3406, December.
    8. Gong, Cynthia M. & Lizieri, Colin & Bao, Helen X.H., 2019. "“Smarter information, smarter consumers”? Insights into the housing market," Journal of Business Research, Elsevier, vol. 97(C), pages 51-64.
    9. repec:zbw:bofrdp:urn:nbn:fi:bof-201510061415 is not listed on IDEAS
    10. repec:bof:bofrdp:urn:nbn:fi:bof-201510061415 is not listed on IDEAS
    11. Eerola, Essi & Määttänen, Niku, 2013. "Matching in the housing market with risk aversion and savings," ETLA Working Papers 3, The Research Institute of the Finnish Economy.
    12. L. Li & K. W. Chau, 2024. "Information Asymmetry with Heterogeneous Buyers and Sellers in the Housing Market," The Journal of Real Estate Finance and Economics, Springer, vol. 68(1), pages 138-159, January.
    13. Eerola, Essi & Määttänen, Niku, 2015. "Matching and credit frictions in the housing market," Research Discussion Papers 20/2015, Bank of Finland.
    14. repec:zbw:bofrdp:2015_020 is not listed on IDEAS
    15. Eerola, Essi & Määttänen, Niku, 2015. "Matching and credit frictions in the housing market," Bank of Finland Research Discussion Papers 20/2015, Bank of Finland.
    16. Noorsidi Aizuddin Mat Noor & Muhammad Nur Ezzat Eshamuddin & Nurul Syakima Mohd Yusoff & Farhana Diana Deris & Mohd Hafızal Ishak & Afizan Mohktar, 2024. "Exploring the Issues and Scenarios among Malaysia’s Real Estate Valuers Community Related to Smart City Concepts," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(5), pages 1806-1813, May.

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    More about this item

    Keywords

    Housing prices; Time on the market; Information; Learning; Differences-in-Differences;
    All these keywords.

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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