Fire Sales and House Prices

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Fire Sales and House Prices

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dc.contributor.author Andersen, Steffen
dc.contributor.author Meisner Nielsen, Kasper
dc.date.accessioned 2013-12-16T08:56:43Z
dc.date.available 2013-12-16T08:56:43Z
dc.date.issued 2013-12-16
dc.identifier.uri http://hdl.handle.net/10398/8838
dc.description.abstract We exploit a natural experiment in Denmark to investigate when forced sales lead to fire sale discounts. Forced sales result from sudden deaths of house owners in an institutional environment in which beneficiaries are forced to settle the estate, and hence sell the house, within 12 months. We identify 6,329 forced sales by suddenly deceased house owners, and find that forced sales bring in lower prices than do comparable houses as the deadline winds down: We find no discounts for sales long before the deadline, and discounts of 12.5% for sales shortly before the deadline. Market conditions and the urgency of the sale also affect the average discount: Discounts are larger when house prices contract, in thin markets where demand is lower, and when the sale is more likely to be a fire sale because of financial or liquidity constraints. Late fire sales are more likely when the house price is in the loss domain suggesting that disposition effects play a role in explaining discounts. We establish these results using (i) a hedonic pricing model, and (ii) the tax authorities’ yearly assessments of value as benchmark for realized prices. Overall, our results characterize market conditions under which forced sales lead to fire sale discounts. en_US
dc.format.extent 34 en_US
dc.language eng en_US
dc.subject.other Household finance en_US
dc.subject.other Fire sales en_US
dc.subject.other Financial constraints en_US
dc.subject.other Real estate en_US
dc.subject.other Sudden death en_US
dc.title Fire Sales and House Prices en_US
dc.type cp en_US
dc.contributor.corporation Copenhagen Business School. CBS en_US
dc.contributor.department Økonomisk Institut en_US
dc.contributor.departmentshort ECON en_US
dc.contributor.departmentuk Department of Economics en_US
dc.contributor.departmentukshort ECON en_US
dc.description.notes Paper presented at Economic Seminar Series Aarhus University, April 30, 2013. Aarhus, Danmark en_US
dc.publisher.city Frederiksberg en_US
dc.publisher.year 2013 en_US
dc.title.subtitle Evidence from Estate Sales due to Sudden Death en_US


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