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Clustering in Real Estate Prices: Determinants and Consequences

Author

Listed:
  • Oded Palmon

    (Rutgers University)

  • Barton A. Smith
  • Ben J. Sopranzetti

Abstract

We examine the determinants and consequences of price clustering. Real estate list and transaction prices exhibit two price-ending characteristics: even (000-ending) and just-below-even (900-ending). The use of even-ending prices is negatively related to the precision of the price estimates and the cost of rounding. However, the tendency to use just-below-even-ending prices is related to the cost of rounding and to listing agency characteristics. The transaction price and the number of days on market are associated with list price clustering and with listing agency characteristics. Most properties are listed at just-below-even-ending prices, but those listed at even-ending prices sell faster and at a higher price. Finally, better transaction outcomes are positively associated with the number of area-properties listed by the seller?s real-estate agency.

Suggested Citation

  • Oded Palmon & Barton A. Smith & Ben J. Sopranzetti, 2004. "Clustering in Real Estate Prices: Determinants and Consequences," Journal of Real Estate Research, American Real Estate Society, vol. 26(2), pages 115-136.
    • Handle: RePEc:jre:issued:v:26:n:2:2004:p:115-136
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    More about this item

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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