Households in the Housing Market

This dissertation addresses four aspects of household decisions in and around the housing market.
The first chapter investigates negotiations over real estate and finds that men secure better prices than women when negotiating to buy and sell property. However, the gender difference declines substantially when improving controls for the property’s value; and is eliminated when controlling for unobserved heterogeneity in a sample of repeated sales. Rather than evidence of gender differences in negotiation, the initial difference in prices is evidence that men and women demand different properties. Consistently, we find no gender difference in the sales price secured for property inherited from a deceased parent. Provided appropriate controls men and women fare equally well when negotiating over real estate. The study demonstrates that inference on gender differences in negotiation relies critically on controlling for the value of the negotiated item.
The second chapter studies reference dependence among potential sellers in the hous-ing market. It models listing decisions, and structurally estimate household preference and constraint parameters using comprehensive Danish register data. Sellers optimize expected utility from property sales, subject to down-payment constraints, and internalize the effect of their choices on final sale prices and time-on-the-market. The data exhibit variation in the listing price-gains relationship with “demand concavity” bunching in the sales dis-tribution; and a rising listing propensity with gains. Our estimated parameters indicate reference dependence around the nominal purchase price and modest loss aversion. A new and interesting fact that the canonical model cannot match is that gains and down-payment constraints have interactive effects on listing prices.
The third chapter studies the transition to and from homeownership under the recent housing market bust using detailed micro-level data covering the entire Danish population. We document that households that are more affected by falling house prices reduced their likelihood to acquire homeownership during the bust more than other households. These households are characterized by lower levels of net worth, lower income, shorter educations, are singles, and of younger age. Combined with younger households abandoning homeown-ership more under the bust, the bust contributed to a significant inter-generational shift in homeownership from younger to older households.
The fourth chapter studies educational outcomes of children whose parents inherit. Fam-ily wealth and offspring achievements are highly correlated, but the causation is not clear. This study examines both the causal impact and the mechanisms of which family wealth can affect child outcomes. Using bequests from deceased grandparents, I find that the extra parental liquidity neither affects grades, high school and college enrollment, or high school drop out rates of children. Parents do not send offspring to different schools, move to better neighborhoods, or reduce their own nor their children’s work time. The additional wealth is spent on household consumption through bigger houses, cars, and holiday homes. The results suggest than in a system with universal education, public funds are probably better spent on improving school quality than making transfers to parents.