Efficiency in housing markets
Subtitle: do home buyers know how to discount?
By: Erik Hjalmarsson and Randi Hjalmarsson
Contributors: Hjalmarsson, Randi; Board of Governors of the Federal Reserve System (U.S.)
Series: International finance discussion papers -- no. 879; International finance discussion papers (Online) -- no. 879.
Publisher: Federal Reserve Board
Published: 2006
Place of publication: Washington, D.C
Language: eng
Format: [electronic resource] :
Description: "We test for efficiency in the market for Swedish co-ops by examining the negative relationship between the sales price and the present value of future rents.  If the co-op housing market is efficient, the present value of co-op rental payments due to underlying debt obligations of the cooperative should be fully reflected in the sales price.  However, we find that, on average, a one hundred kronor increase in the present value of future rents only leads to a 45 to 65 kronor reduction in the sales price; co-ops with higher rents are thus relatively overpriced compared to those with lower rents.  Our analysis indicates that pricing tends to be more efficient in areas with higher educated and wealthier buyers.  By relying on cross-sectional relationships in the data, our results are less sensitive to transaction costs and other frictions than time-series tests of housing market efficiency"--Federal Reserve Board web site.
Notes: Title from PDF file as viewed on 1/18/2007.

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