To Sell or Not to Sell: List Price, Transaction Price and Marketing Time in the Housing Market

This paper specifies and estimates a structural model of home seller behavior. The model is an application of search theory to housing and is estimated using method of moments. The estimation method uncovers an analytical closed-form relationship between reduced- form coefficients of hedonic and marketing time equations and the structural parameters. Estimation can thus be performed using individual level or aggregate data. The model is first estimated using individual housing transaction data from a large suburb of the Washington D.C. metropolitan area during 2006, and it is used to analyze the relationship between list prices and marketing time. Then, for each year in the period 2002-2008, aggregate data are used to compute one structural parameter that measures home sellers’ bargaining power. Trends of this estimate coincide with popular perceptions about the “heat” of the housing market in the area.