NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Equity and Time to Sale in the Real Estate Market

David Genesove, Christopher J. Mayer

NBER Working Paper No. 4861*
Issued in September 1994
NBER Program(s):   IO

Recent research has proposed a pro-cyclical link between sales volume and prices in the real estate market through changes in the equity of existing homeowners. This article uses data from the Boston condominium market to show that owners with high loan-to-value ratios take longer to sell their properties than owners with low loan-to- value ratios. Properties with high loan-to-value ratios are listed at higher asking prices; when sold, they receive higher prices than units with less debt. Together, these results are consistent with a search model in which owners 'constrained' by large amounts of debt set a higher reservation price than 'unconstrained' owners, accepting a lower probability of sale in exchange for a higher final sales price.

*Published: american economic review, june 1997.

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