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Testing For Micro‐Efficiency In The Housing Market

Author

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  • André Kallåk Anundsen
  • Erling Røed Larsen

Abstract

Using highly granular transaction‐level data for the Norwegian housing market over the period 2002–2014, we investigate whether excessive prices persist or revert in repeat sales. Excessiveness in prices is detected by comparing selling prices to predicted prices implied by a hedonic model, which includes a rich set of attributes. Persistence is rejected and there is substantial reversion in excessive prices. Our results also show little scope for profitable arbitrage by investing in apparently underpriced units. We suggest that excessive prices are related to the stochastic arrival of interested purchasers at public showings, which we show is nonrepeatable.

Suggested Citation

  • André Kallåk Anundsen & Erling Røed Larsen, 2018. "Testing For Micro‐Efficiency In The Housing Market," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 59(4), pages 2133-2162, November.
    • Handle: RePEc:wly:iecrev:v:59:y:2018:i:4:p:2133-2162
    DOI: 10.1111/iere.12332
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    Cited by:

    1. Andr Kall k Anundsen & Bjørnar Karlsen Kivedal & Erling R ed Larsen & Leif Anders Thorsrud, 2020. "Behavioral changes and policy effects during Covid-19," Working Papers No 07/2020, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
    2. Greenaway-McGrevy, Ryan & Sorensen, Kade, 2021. "A Time-Varying Hedonic Approach to quantifying the effects of loss aversion on house prices," Economic Modelling, Elsevier, vol. 99(C).
    3. Anundsen, André Kallåk & Kivedal, Bjørnar Karlsen & Røed Larsen, Erling & Thorsrud, Leif Anders, 2023. "Behavioral changes in the housing market before and after the Covid-19 lockdown," Journal of Housing Economics, Elsevier, vol. 59(PB).
    4. Erling Røed Larsen, 2021. "Intra‐Week Price Patterns in the Housing Market," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(1), pages 327-352, January.

    More about this item

    JEL classification:

    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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