A Review of Literature Utilizing Simultaneous Modeling Techniques for Property Price and Time-on-Market

AbstractThe property price-marketing duration relationship is an important component of many real estate studies. However, contrary to theories, and widely-held notions of many researchers, the relationship is not as straightforward as generally assumed. In this paper, we summarize the literature and model price and marketing time to highlight the nature of the property price-marketing time tradeoff. As defined in this work, "simultaneous modeling'' includes studies in which marketing time appears as a control in pricing models, as well as studies in which property price is used as a control in time-on-market models.The effects of property price on marketing span and of marketing span on property price have provided a fertile area of inquiry for many years. The interaction of these two property metrics has been the focus of a number of real estate studies. Many other studies rely on the relationship between the two as an integral part of their analysis, often offering insight into the price-time-on-market tradeoff while focusing on another question entirely. Contrary to the assumptions underlying a number of the works aimed at the price and marketing time relationship, the empirical findings are actually less convincing than many real estate researchers realize. Despite the importance of this relationship, and the somewhat mixed empirical results, no one has reviewed the literature to gather findings from the studies that incorporate some type of price or time-on-market control in the empirical modeling of the other metric. This study seeks to bridge that gap.Sirmans, MacPherson, and Zietz (2005) provide a review of the characteristics most often used in the hedonic pricing literature, including housing features, transaction participant attributes, and geographic controls. Of the studies surveyed in their work, 18 include time-on-market as an independent variable in the hedonic pricing equation; however, they only discuss seven of these articles in any detail, and they do not focus on the time-on-market half of the modeling problem. Zumpano and Hooks (1988), Yavas (1994), Benjamin, Jud, and Sirmans (2000), and Zietz and Sirmans (2011) provide reviews primarily aimed at the brokerage literature. While a few of the works surveyed in these studies are also discussed in the current work, the focus here is on the results of any simultaneous price and time-on-market estimations, in addition to a brief overview of the primary findings of the original study. For example, while Rosen (1974) is rightly included in several of the above surveys as the primary article providing the theoretical underpinning for the use of hedonic pricing in real estate research, the article is not reviewed in detail here, since it does not include any specific discussion or use of time-on-market as a control for price or vice-versa. Thus, while there is admittedly some overlap with these earlier literature reviews, the overlap is minimal.The definition of "simultaneous modeling'' employed in this study includes works that model price in the presence of a marketing time control, or vice versa. True simultaneous modeling requires the use of a two-stage least squares (2SLS) approach that has not been fully embraced by real estate researchers, although it is growing in popularity. Since common use of 2SLS is relatively new, and it represents a substantially different methodology than modeling price or time-on-market in the presence of a control for the other property metric, coverage of works utilizing the 2SLS methodology is included in a separate section.Since this work summarizes empirical findings regarding the sale price-marketing time relationship, purely theoretical works addressing that relationship are excluded from consideration, including theory pieces that parameterize their models to obtain numerical estimates. This restriction results in the exclusion of a number of "standards and favorites,'' including Yinger (1981), Crockett (1982), Amott (1989), Miceli (1989), Anglin and Amott (1991), and Arnold (1992). …