On the role of public price information in housing markets

This paper studies the impact of increased price information on the functioning of the housing market. We first study the implications of new information for market outcomes in a theoretical framework so as to disentangle the potential channels through which information may be important. The results suggest that increased information leads to higher prices. The time on the market, in turn, may become longer or shorter depending on which side of the market reacts more to the new information. In the empirical part of the paper, we utilize a Finnish policy intervention to estimate these effects. In July 2007, a website with detailed information about individual housing transactions was opened. The website covered only part of the country, which allows us to use the Differences-in-Differences method to estimate the effect of increased information. The results show that increased information on past transactions led to higher prices and shorter times on the market. In the light of our theoretical results, the empirical evidence therefore indicates that buyers react more to the new information than the sellers.