Information Salience and Mispricing in Housing

• 成果类型: Article
• 署名作者: Agarwal, Sumit; Karapetyan, Artashes
• 署名单位: National University of Singapore; ESSEC Business School
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2021.4253
• 发表日期: 2022
• 页码: 9082-9106
• 关键词: salience; housing; Cooperatives; mortgage; household finance; Mispricing

摘要

Making the purchase price fully salient to consumers has been shown to affect demand and equilibrium prices in various markets. Using a setting where part of the home acquisition price is in the form of nonsalient debt, we show this can happen in housing-a market where a typical household makes its largest acquisition. A regulation that made the debt and the total price salient for homebuyers eliminated a large mispricing caused by consumers' inattention to the debt before the regulation. An average homebuyer would lose about $13,300 by acquiring a dwelling with one-standard deviation ($51,000)-higher debt, but this is nearly eliminated after the regulation. To shed light on the underlying channels, we use administrative data and show that young, financially inexperienced, and first-time homebuyers used to overpay the most. The results are not driven by rational channels based on liquidity constraints and adverse selection. Our findings imply that making all-inclusive house price and mortgage features salient at the time of advertising the sale can help avoid unintentional borrowing.