"Loss Aversion and Seller Behavior: Evidence from the Housing Market"
Quarterly Journal of Economics,
Volume: 116 | Issue: 4 | Pages: 1233-60
Publication type: Journal article
Research Archive Topic: Real Estate
Data from downtown Boston in the 1990s show that loss aversion determines seller behavior in the housing market. Condominium owners subject to nominal losses 1) set higher asking prices of 25-35 percent of the difference between the property's expected selling price and their original purchase price; 2) attain higher selling prices of 3-18 percent of that difference; and 3) exhibit a much lower sale hazard than other investors, but hold for both. These findings suggest that sellers are averse to realizing (nominal) losses and help explain the positive price-volume correlation in real estate markets.
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