The role of buy-side anchoring bias: Evidence from the real estate market

•We examine anchoring bias on willingness-to-pay via a housing search model.•The empirical study is based on a hand-collected data from an emerging market.•We found the heuristic anchoring prevails regardless of homebuyer's gender.•Higher uncertainty and out-of-state purchasing exhibit higher levels of anchoring.

We examine anchoring bias within the real estate market by evaluating evidence and a priori arguments on the effects of investor sentiment on willingness-to-pay among homebuyers. Based upon a unique dataset which provides the complete histories of transactions in the real estate market, our findings reveal that the anchoring phenomenon prevails regardless of homebuyer's gender. Homebuyers faced with higher systemic uncertainty and out-of-state housing transactions exhibit higher levels of anchoring; the heuristic thinking biased on investors' willingness-to-pay gives rise to the deviations from reasonable housing values.