Real Estate Brokers: Do they inflate housing prices? - CEREG

More documents

Recommendations

Info

semester. Therefore, demand (and consequently prices) should be higher during that period.But as there is a three month lag between the preliminary contract and the sale contract, theprice increase should appear at the closing period; it is to say the end of the year. Estimationsreveal that there is an increasing trend of prices through the calendar year although the firstmonths of the year are not always significant. For more details see annex 1.Table 2b │ Summary statistics of buyers' and sellers' characteristicsBroker-AssistedTransactionsNon-Broker-AssistedTransactionsFull SampleProportion of Broker-AssistedTransactions in Full SampleBuyer CharacteriticsAge41(14)*Farmers (%) 0.5 0.3 0.5 81.6Artisans, shopkeepers, and employers (%) 5.5 6.3 5.7 67.4Managers and higher-grade occupations (%) 29.6 26.2 28.6 73.1Intermediate-grade occupations (%) 32.6 34.2 33.1 69.7Clerical workers (%) 14.3 14.5 14.4 70.4Manual workers (%) 5.5 6.7 5.9 66.3Retired persons (%) 8.8 8.1 8.6 72.4Other persons without occupational activity (%) 3.1 3.7 3.3 67.0Couple (%) 40.4 40.4 40.4 70.6French citizenship (%) 97.2 97.5 97.3 70.6Seller CharacteriticsAge53(16)*Farmers (%) 0.4 0.4 0.4 70.5Artisans, shopkeepers, and employers (%) 7.1 7.5 7.2 69.5Managers and higher-grade occupations (%) 22.0 21.6 21.9 71.0Intermediate-grade occupations (%) 23.2 25.0 23.8 69.1Clerical workers (%) 11.8 11.6 11.7 71.0Manual workers (%) 4.2 4.3 4.2 70.2Retired persons (%) 26.3 24.8 25.8 71.9Other persons without occupational activity (%) 5.0 4.8 4.9 71.4Couple (%) 55.6 54.3 55.2 71.1French citizenship (%) 98.3 98.1 98.2 70.7* The values in parentheses are standard error.Number of Observations: 7495 broker-assisted, 3115 non-agent-assisted, 10610 total41(13)*51(16)*41(14)*53(16)*////The socio-occupational categories developed by the National Institute of Statistics andEconomic Studies (Institut National de la Statistique et des Études Économiques: INSEE) forcoding the population census is employed as a measure of opportunity cost of search. Eventhough, there are only eight categories, it gives indication on income levels and socialcharacteristics. Indeed, people from the socio-occupational categories Managers and highergradeoccupations, Intermediate-grade occupations, Clerical workers, and Manual workerstend to be home buyers rather than home sellers. On the contrary, there are many more retiredcouples selling than buying houses. It is well known in the literature that real estate brokerreduces the search duration of their clients. Hence, higher social categories, with presumablyhigher opportunity costs, will probably choose to engage a real estate broker.14
Other characteristics such as matrimonial status, age, or nationality may also affect thedecision to engage a real estate broker. Nationality is included to assess informationaladvantages on the real estate market that French people may have relatively to foreigners.Individuals with less knowledge of the market may have a greater incentive to seek theassistance of a broker. Moreover, buyers coming from countries with expensive housing couldspend more for their houses in the destination city. Simonsohn and Loewenstein (2006) findthat households moving from more expensive cities spend more in rent in their new city thanthose coming from cheaper cities, holding other factors constant. They also show that aspeople stay in their new city, they get used to the new prices and readjust their housingexpenditures.Finally, the variable RE indicates whether and to what extent real estate brokers affect the saleprice of houses they sell. A positive significant coefficient would suggest that real estatebrokers do increase the price of houses they sell. A complete description of the variables usedin this study can be found in Table 1. Summary statistics are displayed in Tables 2a and 2b.The first three columns show statistics for the broker-assisted, the non-broker-assisted, andthe full sample respectively. The last column gives, for each variable, the proportion ofbroker-assisted transactions in the full sample.5. Empirical ResultsThe Probit ModelThe Probit estimates of the decision to use a broker are found in Tables 3 and 4. Buyersfalling into the socio-occupational categories artisans, shopkeepers, and employers, and otherpersons without occupational activity are more inclined to use a real estate broker. The lattercategory of course includes unemployed individuals searching for jobs but not only. It mayalso include housewives, house husbands, heirs, retired persons too young to fall into theretired category… It is not aberrant to assume that people who have money problems do notpurchase houses. Hence, buyers who fall into this category are assumed to be wealthy andtherefore are maybe more willing to pay for the services of real estate brokers. None of thesocio-occupational coefficients for sellers are significant.15
Page 1 and 2: Real Estate Brokers: Do they inflat
Page 4: esults have risen from empirical st
Page 7 and 8: Zietz and Newsome (2001), examined
Page 9 and 10: - In terms of education he must hol
Page 11 and 12: ias, when not corrected for in the
Page 13: The number of rooms is included to
Page 17 and 18: Table 4 │Probit estimates of brok
Page 19 and 20: This is surprising as the assisted
Page 21 and 22: We estimate separate regressions fo
Page 23 and 24: Table 5 │House price estimates: O
Page 25 and 26: experience of buyers and sellers me
Page 27 and 28: ReferencesBajtelsmit, V. L. and E.
Page 29: Annex 2 │Chart of MarseilleThe ma

Real Estate Brokers: Do they inflate housing prices? - CEREG

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?