LIST PRICE SIGNALING AND BUYER BEHAVIOR IN THE HOUSING-MARKET

To determine whether list price contains useful information for antici pating trends in eventual transactions prices, we develop a model of b uyer behavior from a search-theoretic perspective. Using data from the Baron Rouge, Louisiana, housing market between 1985 and 1992, we esti mate separate price indexes with list price and selling price as the r espective dependent variables in the hedonic regressions. Consistent w ith our theory, we find that the list price may lead the market when f unctioning as a signal of seller intent, but list price will probably lag a market driven by buyer willingness to purchase. Granger causalit y tests conducted on quarterly data for the eight-year study support l isting price as a leading indicator of selling price. However, an exam ination of the indexes around the period of market reversal suggest ot herwise. Indeed, listing prices appear to contain the least useful inf ormation at the times when information would be most valuable: at the peaks and troughs of the market cycle.