Examining the Cash-Only Price Discount and the Driving Forces of Cash-Only Transactions in the Housing Market

This paper investigates the effects of cash-only transactions on residential property values before, during and after the financial crisis. Using a comprehensive database of residential property sales in Tallahassee, FL from 2006 to 2015 and a propensity score matching model, we find that, on averag...

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Bibliographic Details
Published inThe journal of real estate finance and economics Vol. 67; no. 3; pp. 480 - 516
Main Authors Seo, Youngme, Holmes, Cynthia, Lee, Mark (Seung Hwan)
Format Journal Article
LanguageEnglish
Published New York Springer US 01.10.2023
Springer Nature B.V
Subjects
Cash payments
Debt financing
Discounts
Economic crisis
Economics
Economics and Finance
Financial Services
Housing market
Mortgages
Propensity
Property values
Purchasing
Real estate sales
Regional/Spatial Science
Sales
Transactions
Tallahassee Florida
United States > US
Cash-only transaction
Cash discount
Residential real estate
Financial crisis
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Summary:This paper investigates the effects of cash-only transactions on residential property values before, during and after the financial crisis. Using a comprehensive database of residential property sales in Tallahassee, FL from 2006 to 2015 and a propensity score matching model, we find that, on average, cash-only transaction is associated with a 4.9% discount to the overall housing price. Further analyses reveal that the cash-only discount is present only in the lower- price segment after the financial crisis. Although cash-only transactions are more common for distressed, investor-purchased and rental properties, we find no significant cash-only price discount for these property categories except for the lower-priced segment. Overall, we demonstrate that cash-only price discounts are less contingent on the distressed status, but more so driven by the increased supply and attractiveness of lower-priced homes by investors.
ISSN:0895-5638
1573-045X
DOI:10.1007/s11146-020-09807-z