How Many Listings Are Too Many? Agent Inventory Externalities And The Residential Housing Market

Keywords

Asymmetric information; House liquidity; House prices; Moral hazard; Principal-agent problem; Residential housing

Abstract

Given the significant role of real estate agents in the housing market, this study examines how agents' incentives regarding the size of their listing inventories indirectly affect residential home prices and liquidity. The theory shows that taking on additional inventory generates a critical principal-agent issue, resulting in the dilution of an agent's selling effort and, ultimately, creating an externality that adversely impacts housing market outcomes across listings. It remains an empirical question whether diluted sales effort leads to lower prices, longer time on market, or both. The empirical results reveal significant inventory externality effects, as greater agent inventory tends to reduce selling price and substantially reduce liquidity for clients' properties in this market.

Publication Date

6-1-2015

Publication Title

Journal of Housing Economics

Volume

28

Number of Pages

130-143

Document Type

Article

Personal Identifier

scopus

DOI Link

https://doi.org/10.1016/j.jhe.2015.04.002

Socpus ID

84929584455 (Scopus)

Source API URL

https://api.elsevier.com/content/abstract/scopus_id/84929584455

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