Alex Solis

Abstract:

We ask whether the asking price of an apartment has any effect on the final sale price using transaction data from the Swedish housing market. Apartments listed at a price just below a round number are sold, after the auction, at a 3.5-6.5% higher price than those that were listed at exactly the same round number. We show that this effect does not appear to be driven by i) differences in observable characteristics of the apartment, ii) differences in real estate agents’ behavior or iii) institutional characteristics of the market – such as the search interface in the website used for ads. Instead, we hypothesize that buyers perceive apartments listed just below a round number as cheaper and hence disproportionally compete in auctions involving those. Evidence from a dataset of housing auctions and from a survey among agents supports this hypothesis.