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Econometric Modelling of Average Housing Prices in Local Markets and the Price Anchoring Effect

Author

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  • Doszyń Mariusz

    (Faculty of Economics and Management, University of Szczecin, ul. Aleja Papieża Jana Pawła II 22A, 70-453 Szczecin, Poland)

  • Kokot Sebastian

    (Faculty of Economics and Management, University of Szczecin, ul. Aleja Papieża Jana Pawła II 22A, 70-453 Szczecin, Poland)

Abstract

This paper employs the econometric models of relationships over time to evaluate the change in the unit prices of apartments on the local secondary markets in Warsaw and Szczecin, depending on various socioeconomic factors. Indicators reflecting the influence of socioeconomic aspects in these cities and the lagged values of housing prices, acting as so-called anchors in this model, were used as the independent variables. The results obtained from this analysis indicate that it is the lagged prices of housing that have the strongest influence on the formation of price levels in the market. The study confirms the presence of the so-called price anchoring effect, which can be understood as the tendency of market participants to accept prices at levels that can be justified not only by socio-economic factors, but also by the price levels established in their minds. The main purpose of the research presented here is to show that there is no close relationship between quoted housing prices and their objective factors. The quality of models reflecting these relationships clearly improves when lagged housing prices are introduced as the explanatory variables, which may confirm the price anchoring effect derived from behavioral economics, meaning that the heuristics of anchoring and adjustment can be applied to the analysis of the behavior of a collective of individuals - many market participants.

Suggested Citation

  • Doszyń Mariusz & Kokot Sebastian, 2024. "Econometric Modelling of Average Housing Prices in Local Markets and the Price Anchoring Effect," Real Estate Management and Valuation, Sciendo, vol. 32(3), pages 116-126.
    • Handle: RePEc:vrs:remava:v:32:y:2024:i:3:p:116-126:n:1009
    DOI: 10.2478/remav-2024-0029
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    References listed on IDEAS

    as
    1. Krzysztof DRACHAL, 2015. "Cointegration of Property Prices in Poland," Expert Journal of Economics, Sprint Investify, vol. 3(1), pages 1-4.
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    3. Ka-Shing Cheung & Chung-Yim Yiu & Yihan Guan, 2022. "Homebuyer Purchase Decisions: Are They Anchoring to Appraisal Values or Market Prices?," JRFM, MDPI, vol. 15(4), pages 1-13, March.
    4. G. Donald Jud & Dan T. Winkler, 2002. "The Dynamics of Metropolitan Housing Prices," Journal of Real Estate Research, American Real Estate Society, vol. 23(1/2), pages 29-46.
    5. Min Hwang & John M. Quigley, 2006. "Economic Fundamentals In Local Housing Markets: Evidence From U.S. Metropolitan Regions," Journal of Regional Science, Wiley Blackwell, vol. 46(3), pages 425-453, August.
    6. Baffoe-Bonnie, John, 1998. "The Dynamic Impact of Macroeconomic Aggregates on Housing Prices and Stock of Houses: A National and Regional Analysis," The Journal of Real Estate Finance and Economics, Springer, vol. 17(2), pages 179-197, September.
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    More about this item

    Keywords

    econometric models of housing; prices; housing market; price anchoring; Poland;
    All these keywords.

    JEL classification:

    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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