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Price Spreads and Residential Housing Market Liquidity

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  • Jud, G Donald
  • Winkler, Daniel T
  • Kissling, Grace E

Abstract

Most studies of housing market liquidity have measured liquidity in terms of time on the market (TOM), and have sought to explain TOM in terms of property characteristics and measures of market conditions. This paper departs from past studies of housing market liquidity by examining the spread between the listing and contract prices. We develop theory to explain the price spreads in the residential housing market. The model includes the list price of the home, the cost of the search, the standard deviation of offer prices, and TOM. Empirical tests using 3,597 sales for 25 months show a robust relationship of housing market spreads and these variables. Listing price and cost of search have the predicted positive coefficients, and the standard deviation of price offers is found to be negatively related to the price spread. Copyright 1995 by Kluwer Academic Publishers

Suggested Citation

  • Jud, G Donald & Winkler, Daniel T & Kissling, Grace E, 1995. "Price Spreads and Residential Housing Market Liquidity," The Journal of Real Estate Finance and Economics, Springer, vol. 11(3), pages 251-260, November.
    • Handle: RePEc:kap:jrefec:v:11:y:1995:i:3:p:251-60
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    Cited by:

    1. Ying Fan & Charles Ka Yui Leung & Zan Yang, 2022. "Financial conditions, local competition, and local market leaders: The case of real estate developers," Pacific Economic Review, Wiley Blackwell, vol. 27(2), pages 131-193, May.
    2. John D. Benjamin & G. Donald Jud & G. Stacy Sirmans, 2000. "Real Estate Brokerage and the Hosting Market: An Annotated Bibliography," Journal of Real Estate Research, American Real Estate Society, vol. 20(1), pages 217-278.
    3. Galesi, Alessandro & Mata, Nuria & Rey, David & Schmitz, Sebastian & Schuffels, Johannes, 2020. "Regional Housing Market Conditions in Spain," Research Memorandum 029, Maastricht University, Graduate School of Business and Economics (GSBE).
    4. Peyman Khezr & Abhijit Sengupta, 2014. "Asking Price Mechanism with Dynamic Arrivals," Discussion Papers Series 524, School of Economics, University of Queensland, Australia.
    5. Stanley McGreal & Alastair Adair & Louise Brown & James R. Webb, 2009. "Pricing and Time on the Market for Residential Properties in a Major U.K. City," Journal of Real Estate Research, American Real Estate Society, vol. 31(2), pages 209-234.
    6. Seow Eng Ong & Yen Ching Koh, 2000. "Time On-market and Price Trade-offs in High-rise Housing Sub-markets," Urban Studies, Urban Studies Journal Limited, vol. 37(11), pages 2057-2071, October.
    7. Herrin, William E. & Knight, John R. & Sirmans, C.F., 2004. "Price cutting behavior in residential markets," Journal of Housing Economics, Elsevier, vol. 13(3), pages 195-207, September.
    8. Charles Ka Yui Leung & Youngman Chun Fai Leong & Ida Yin Sze Chan, 2002. "TOM: Why Isn’t Price Enough?," International Real Estate Review, Global Social Science Institute, vol. 5(1), pages 91-115.

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