Heterogeneous Real Estate Agents and the Housing Cycle / Sophia Gilbukh, Paul Goldsmith-Pinkham.

Format:

Book

Author/Creator:

Gilbukh, Sophia.

Contributor:

National Bureau of Economic Research.

Goldsmith-Pinkham, Paul.

Series:

Working Paper Series (National Bureau of Economic Research) no. w31683.

NBER working paper series no. w31683

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2023.

Summary:

The real estate market is highly intermediated, with 90 percent of buyers and sellers hiring an agent to help them transact a house. However, low barriers to entry and fixed commission rates result in a market where inexperienced intermediaries have a large market share, especially following house price booms. Using rich micro-level data on 8.5 million listings and a novel instrumental variables research design, we first show that houses listed for sale by inexperienced real estate agents have a lower probability of selling, and this effect is strongest during the housing bust. We then study the aggregate implications of the distribution of agents' experience on housing market liquidity by building a dynamic entry and exit model of real estate agents with aggregate shocks. We find that 3.7 more listings would have been sold in a flexible commission equilibrium. It would require a six-fold increase in entry costs for real estate agents to achieve this level of liquidity within the fixed commission framework.

Notes:

Print version record

September 2023.