Can information regarding previous sales stabilize the house price index? Evidence from a field experiment in Spain

• Published in: Journal of housing and the built environment Vol. 36; no. 2; pp. 353 - 366
• Main Authors: Raya, Josep Maria, Giusti, Giovanni
• Format: Journal Article
• Language: English
• Published: Dordrecht Springer Netherlands 01.06.2021; Springer Nature B.V
• Subjects: Campuses; Estate agencies; Geography; Housing market; Human Geography; Kahneman, Daniel (1934-2024); Landscape/Regional and Urban Planning; Price indexes; Prices; Purchasing; Real estate; Residential care; Sales; Social Sciences; Anchoring effect; Housing; Controlled field experiment; Listing prices
• ISSN: 1566-4910; 1573-7772
• DOI: 10.1007/s10901-020-09775-z

We compare the impact of two different listing price strategies for residential homes on the purchasing price of a property. Previous literature on anchoring effect (Tversky and Kahneman in Science 185(4157):1124–1131, 1974) has encountered a direct relation between the listing price and the sale price. Among the listing prices, the asking price, proposed by the seller, has been found to systematically influence the final purchasing price (Bucchianeri and Minson in J Econ Behav Org 89:76–92, 2013; Han and Strange in J Urban Econ 93:115–130, 2016). In this paper, we study the effect of another possible anchor, the last sale price , given its extended use in important housing markets, such as the US. By means of a controlled field experiment carried out in a real estate agency, we find that when the previous purchasing price is available, buyers’ offers are characterized by a smaller variance from the average offered price, compared to when only the asking price is reported. This result suggests that the previous sale price is a stronger predictor of purchasing price than the asking price is and could be a valid instrument for policy purposes.