Housing prices and the optimal time-on-the-market decision

This paper provides a model for housing prices based on a seller solving the optimal time-on-the market problem. Given the seller's optimal time-on-the market, analytical expressions are provided for both the expected time-on-the-market and the sales price. These expressions facilitate the computation of comparative statics. Consistent with economic intuition, we show that (i) both the expected time-on-the market and sales price decrease as interest rates increase, (ii) the expected time-on-the market increases and the expected sales price decreases as offer activity declines, and (iii) the expected time-on-the market and expected sales price both increase as the list price increases.

► We model a house seller's time-on-the-market decision. ► Expressions for the expected time-on-the-market and the sales price are derived. ► The expected time-on-the-market increases as the list price increases. ► A decline in offers or interest rates increases the expected time-on-the-market.