Advertisement

Testing for Price Anomalies in Sequential Sales

  • Henry J. Munneke
  • Joseph T. L. Ooi
  • C. F. Sirmans
  • Geoffrey K. Turnbull
Article
  • 49 Downloads

Abstract

This paper provides new evidence of sales sequence-real estate price relations in a setting in which consumption risk and completion risk are both minimized and where agglomeration economies do not pertain. The results illustrate that the monotonic declining price “afternoon effect” or rising price from increasing relative demand documented in auction settings do not extend to real estate transactions in open (non-auction) markets. Instead, we find underlying non-monotonic U-shaped and inverted U-shaped sales sequence-price relations for high-rise and mid-rise developments, respectively, when correcting for unit selectivity effects. The results represent price anomalies in that they are evident after removing the effects of previously identified factors associated with sales sequence-price relations.

Keywords

Afternoon effect Sequential sales Price formation Selectively bias 

JEL Classification

R31 R38 D40 

References

  1. Ashenfelter, O. (1989). How auctions work for wine and art. Journal of Economic Perspectives, 3(3), 23–36.CrossRefGoogle Scholar
  2. Ashenfelter, O., & Genesove, D. (1992). Testing for price anomalies in real-estate auctions. American Economic Review, 82(2), 501–505.Google Scholar
  3. Beggs, A., & Graddy, K. (1997). Declining values and the afternoon effect: Evidence from the art auctions. RAND Journal of Economics, 28(3), 544–565.CrossRefGoogle Scholar
  4. Benson, E. D., Hansen, J. L., Schwartz, A. L., & Smersh, G. (1998). Pricing residential amenities: The value of a view. Journal of Real Estate Finance and Economics, 16(1), 55–73.CrossRefGoogle Scholar
  5. Bond, M. T., Seiler, V. L., & Seiler, M. J. (2002). Residential real estate prices: A room with a view. Journal of Real Estate Research, 23(1/2), 129–137.Google Scholar
  6. Burguet, R. (2005). The condominium problem; auctions for substitutes. Review of Economic Design, 9(2), 73–90.CrossRefGoogle Scholar
  7. Chang, C. O., & Ward, C. W. R. (1993). Forward pricing and the housing market: The pre-sales housing system in Taiwan. Journal of Property Research, 10(3), 217–227.CrossRefGoogle Scholar
  8. Chau, K. W., Ma, V. S. M., & Ho, D. C. W. (2001). The pricing of “luckiness” in the apartment market. Journal of Real Estate Literature, 9(1), 31–40.Google Scholar
  9. Fanning, S. F., Grissom, T. V., & Pearson, T. D. (1995). Market analysis for valuation appraisals. Appraisal: Institute.Google Scholar
  10. Fu, Y., & Qian, W. (2014). Speculators and price overreaction in the housing market. Real Estate Economics, 42(4), 977–1007.CrossRefGoogle Scholar
  11. Hollans, H., Martin, R. W., & Munneke, H. J. (2013). Measuring price behavior in new residential subdivisions. Journal of Real Estate Finance and Economics, 47(2), 227–242.CrossRefGoogle Scholar
  12. Lai, R. N., Wang, K., & Zhou, Y. (2004). Sale before completion of development: Pricing and strategy. Real Estate Economics, 32(2), 329–357.CrossRefGoogle Scholar
  13. Lee, L. F. (1982). Some approaches to the correction of selectivity Bias. Review of Economic Studies, 49(3), 355–372.CrossRefGoogle Scholar
  14. Lee, L. F. (1983). Generalized econometrics models with selectivity. Econometrica, 51(2), 507–512.CrossRefGoogle Scholar
  15. Maddala, G. S. (1983). Limited dependent and qualitative variables in econometrics. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
  16. Mayer, C. J. (1998). Assessing the performance of real estate auctions. Real Estate Economics, 26(1), 41–66.CrossRefGoogle Scholar
  17. McAfee, R. P., & Vincent, D. (1993). The declining price anomaly. Journal of Economic Theory, 60(1), 191–212.CrossRefGoogle Scholar
  18. Milgrom, & Weber. (1982). A theory of auctions and competitive bidding. Econometrica, 50(5), 1089–1122.CrossRefGoogle Scholar
  19. Munneke, H. J., Ooi, J. T. L., Sirmans, C. F., & Turnbull, G. K. (2011). Sequence of sales of similar assets: The law of one price and real estate. Journal of Regional Science, 51(2), 355–370.CrossRefGoogle Scholar
  20. Ong, S. E., & Koh, Y. C. (2000). Time on-market and price trade-offs in high-rise housing sub-markets. Urban Studies, 37(11), 2057–2071.CrossRefGoogle Scholar
  21. Ooi, J. T. L., & Le, T. T. T. (2013). The spillover effects of infill developments on local housing prices. Regional Science and Urban Economics, 43(6), 850–861.CrossRefGoogle Scholar
  22. Rauch, J. E. (1993). Does history matter only when it matters little? The case of City-industry location. Quarterly Journal of Economics, 108(3), 843–867.CrossRefGoogle Scholar
  23. Sirmans, C. F., Turnbull, G. K., & Dombrow, J. (1997). Residential development, risk, and land prices. Journal of Regional Science, 37(4), 613–628.CrossRefGoogle Scholar
  24. Tse, R. Y. C. (2002). Estimating Neighbourhood effects in house prices: Towards a new hedonic model approach. Urban Studies, 39(7), 1165–1180.CrossRefGoogle Scholar
  25. Tu, Y., & Bao, H. X. H. (2009). Property rights and housing value: The impacts of political stability. Real Estate Economics, 37(2), 235–257.CrossRefGoogle Scholar
  26. Van Den Berg, G., Van Ours, J. C., & Pradhan, M. P. (2001). The declining price anomaly in Dutch Dutch rose auctions. American Economic Review, 91(4), 1055–1062.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  • Henry J. Munneke
    • 1
  • Joseph T. L. Ooi
    • 2
  • C. F. Sirmans
    • 3
  • Geoffrey K. Turnbull
    • 4
  1. 1.Department of Ins/LS/REUniversity of GeorgiaAthensUSA
  2. 2.Department of Real EstateNational University of SingaporeSingaporeSingapore
  3. 3.Department of Risk Mgt/Insurance, Real Estate, and Bus. LawFlorida State UniversityTallahasseeUSA
  4. 4.Dr. P. Phillips School of Real EstateUniversity of Central FloridaOrlandoUSA

Personalised recommendations