Loss aversion, equity constraints and seller behavior in the real estate market

Anenberg, Elliot

doi:10.1016/j.regsciurbeco.2010.08.003

Cited by 85 publications

(87 citation statements)

References 12 publications

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“…This study is an extension of previous loss aversion studies on the real estate market (e.g., Genesove and Mayer 2001, Bokhari and Geltner 2011, Leung and Tsang 2013, Anenberg 2011. Using the September 2003-June 2014 land purchase and house sales data from Beijing, this study has shown that loss aversion affects pricing decisions.…”

Section: Conclusion and Future Research Directionsmentioning

confidence: 75%

“…When one obtains a higher price than the price one paid to acquire the property, a prospective gain exists; otherwise, a loss is expected. The initial purchase price has already been regarded as a reference in some highly influential studies on the housing market (Genesove and Mayer 2001, Leung and Tsang 2013, Anenberg 2011) and on the commercial real estate market (Bokhari and Geltner 2011).…”

Section: Role Of Reference Pointsmentioning

confidence: 99%

“…However, these candidates have not been compared. Real estate studies, such the influential study of Genesove and Mayer (2001) on the Boston condominium market and the follow-up studies by Bokhari and Geltner (2011), Leung and Tsang (2013), and Anenberg (2011), showed that the previous purchase price is the most used candidate. Undoubtedly, being the initial cost, previous purchase price could perform naturally as a benchmark for monetary gains and losses.…”

Section: Introductionmentioning

confidence: 99%

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Loss Aversion and Residential Property Development Decisions in the People's Republic of China: A Semi-Parametric Estimation

Bao

Meng

2017

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Asian Development Bank InstituteThe Working Paper series is a continuation of the formerly named Discussion Paper series; the numbering of the papers continued without interruption or change. ADBI's working papers reflect initial ideas on a topic and are posted online for discussion. ADBI encourages readers to post their comments on the main page for each working paper (given in the citation below). Some working papers may develop into other forms of publication.ADB recognizes "China" as the People's Republic of China. The views expressed in this paper are the views of the author and do not necessarily reflect the views or policies of ADBI, ADB, its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.Working papers are subject to formal revision and correction before they are finalized and considered published.Asian Development Bank Institute Kasumigaseki Building, 8th Floor 3-2-5 Kasumigaseki, Chiyoda-ku Tokyo 100-6008, JapanTel:+81-3-3593-5500 Fax:+81-3-3593-5571 URL:www.adbi.org E-mail: info@adbi.org AbstractLoss aversion is a core concept in prospect theory that refers to people's asymmetric attitudes with respect to gains and losses. More specifically, losses loom larger than gains. With the capability of loss aversion to explain economic phenomena, some of which are puzzling under expected utility theory, this concept has received significant attention. This study develops a behavioral model of loss aversion to explain the development decisions by residential property developers in the People's Republic of China. Under the leasehold property right system, real estate development has two stages-first to lease land from the government, and then to develop the property according to the lease terms. This presents a unique opportunity to test the presence and effect of loss aversion in real estate development decisions. More specifically, this study determines when the land premium paid by a developer is substantially higher than the market value, whether and how this "paper loss" will affect the pricing of the housing products and development time of the project in future development. We use a sample of land and house transaction records from Beijing to test the hypothesis. This is the first study to use a semi-pa...

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Section: Conclusion and Future Research Directionsmentioning

confidence: 75%

Section: Role Of Reference Pointsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Loss Aversion and Residential Property Development Decisions in the People's Republic of China: A Semi-Parametric Estimation

Bao

Meng

2017

SSRN Journal

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“…Einiö et al (2008) Anenberg (2011: Evidence for both effects Equity constraints Stein (1995), Lamont & Stein (1999) Genesove & Mayer (1997) Cauley & Pavlov (2002) Option value Krainer (2001) Qian (2013 …”

Section: Literaturementioning

confidence: 99%

Explaining Price Rigidities on the Housing Market with Prospect Theory

Vandrei¹,

Larson²,

Springer³

2017

24th Annual European Real Estate Society Conference

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“…They find a small role for down-payment effects. Relatedly, Anenberg (2011) analyzes the San Francisco Bay Area housing market and in contrast to Genesove and Mayer (2001), reports significant effects of loss aversion on transacted prices. Unlike these two studies, we find that loss aversion played a muted role in the England and Wales' housing markets, not least because the overall gains in values for most properties were positive during the period analyzed.…”

Section: Literaturementioning

confidence: 99%

History Dependence in the Housing Market

Bracke

Tenreyro

2016

SSRN Journal

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Using the universe of housing transactions in England and Wales in the last twenty years, we document a robust pattern of history dependence in housing markets. Sale prices and selling probabilities today are affected by aggregate house prices prevailing in the period in which properties were previously bought. We investigate the causes of history dependence, with its quantitative implications for the post-crisis recovery of the housing market. To do so we complement our analysis with administrative data on mortgages and online house listings, which we match to actual sales. We find that high leverage in the pre-crisis period and anchoring (or reference dependence) both contributed to the collapse and slow recovery of the volume of housing transactions. We find no asymmetric effects of anchoring to previous prices on current transactions; in other words, loss aversion does not appear to play a role over and above simple anchoring.

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Loss aversion, equity constraints and seller behavior in the real estate market

Cited by 85 publications

References 12 publications

Loss Aversion and Residential Property Development Decisions in the People's Republic of China: A Semi-Parametric Estimation

Loss Aversion and Residential Property Development Decisions in the People's Republic of China: A Semi-Parametric Estimation

Explaining Price Rigidities on the Housing Market with Prospect Theory

History Dependence in the Housing Market

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