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Effects of House Flips on Local Housing Transactions

This study explores the possible impacts of short-term house trades, often called “house flips,” on local housing markets. Using nationally representative data across multiple U.S. housing markets during 2000–2013, we test the Spillover Hypothesis and the alternative Competition Hypothesis for the influences of flips on the neighborhood non-flip house transactions. We find that the local flip tendency, our measurement for local flip activity, is negatively associated with the holding durations of neighborhood houses experiencing non-flip resales, and positively associated with their resale prices, after we control for market conditions that affect both flip and non-flip transactions as well as other potential determinants for holding duration and price. The effects are generally more prominent when the local flip tendency is measured for a longer run, supporting the Spillover Hypothesis. These effects are also persistent regardless of whether the local flip tendency is defined as the proportion of flips in the local resales by transaction number or by transaction volume, or whether it is measured continuously or discretely. The results also hold when we endogenize the local flip tendency, or when we change the neighborhood size. These findings demonstrate the substantial influences of flip activities to the local housing market turnover and price movements.

Real Estate Pictures: The Role of Furniture Preferences in Subjective Valuation

In real estate pictures, home staging, which is the temporary display of high-end furniture, is meant to positively impact the sales process for the involved parties: the broker, the seller and also the buyer. In this article we focus on the impact of home staging on the price aspect in this process. In our experimental design to isolate the effect of furniture on valuation, we show pictures with furniture to one group and those without furniture to the other group. The main task for both groups of students is to estimate the market value of an empty apartment. Additionally, they must state their preferences for furniture in an apartment. On aggregate, we do not find significant differences in market value estimates between the two conditions, which is in line with the recent literature. At subsets based on individually indicated preferences for furniture, we find two main differences: those in the group with lower indicated preferences for furniture do not adjust their value estimates in a second estimation task, where the presence of furniture is changed, while those in the second group adjust their value estimates in the second estimate, where the adjustments are significant with a magnitude of approximately 11% based on their preferred condition. We conclude that if a client indicates a high preference for furniture, then the presented furniture affects his or her perception of the property. Additionally, we monitor the dwell time, which is significantly longer for the furnished condition and is an indication of information reception.