Equity and time to sale in the real estate market
Abstract: Estimates from the Boston condominium market show that owners with high loan-to-value ratios take longer to sell their properties than owners with low loan-to-value ratios. When sold, properties with high loan-to-value ratios receive a higher price than units with less debt. Both of these results are consistent with a search model in which owners \\"constrained\\" by large amounts of debt set a higher reservation price than \\"unconstrained\\" owners, accepting a lower probability of sale in exchange for a higher final sales price, and thus lend credibility to theoretical models that establish a link between sales volume and prices through changes in the equity of existing homeowners.
Keywords: Real property;
Status: Published in American Economic Review 87, no. 3 (June 1997): 255-69.
File(s): File format is application/pdf http://www.bostonfed.org/economic/wp/wp1993/wp93_6.pdf
Provider: Federal Reserve Bank of Boston
Part of Series: Working Papers
Publication Date: 1993