Beck, Jason and Scott, Frank and Yelowitz, Aaron (2010): Competition and market structure in local real estate markets.
Download (805kB) | Preview
The persistence of the standard six percent real estate sales commission across markets and over time calls into question the competitiveness of the residential real estate brokerage industry. While there is anecdotal evidence that some local real estate markets are fairly concentrated, no systematic study of market structures has been conducted. We have collected primary data on the number and market shares of real estate brokers in a variety of small, medium, and large real estate markets across the U.S. for 2007 and 2009. In addition to these cross sectional data, we have also collected longitudinal data on the size distribution of firms for Louisville, KY for a nine-year period. In our cross-sectional analysis of medium and large markets, we find no evidence that market concentration might create problems for competition. We do find that small markets on average have higher HHI’s than medium and large markets. The longitudinal analysis reveals that many small brokers are in and out of the market, selling a house or two one year and selling zero houses the next year.
|Item Type:||MPRA Paper|
|Original Title:||Competition and market structure in local real estate markets|
|Keywords:||HHI; real estate brokerage competition; Herfindahl-Hirschman Index|
|Subjects:||L - Industrial Organization > L8 - Industry Studies: Services > L85 - Real Estate Services|
|Depositing User:||Aaron Yelowitz|
|Date Deposited:||18. Dec 2010 20:13|
|Last Modified:||12. Feb 2013 09:58|
Anderson, R., D. Lewis and L.V. Zumpano, “Residential Real Estate Brokerage Efficiency from a Cost and Profit Perspective,” Journal of Real Estate Finance and Economics, 2000, 20:3, 295-310.
Bernheim, B. Douglas and Jonathan Meer, “Do Sellers' Brokers Raise Or Reduce Home Prices? Evidence Of Agency Costs From An Unusual Real Estate Market,” NBER Working Paper No. 13796, February 2008.
Brown, Jeffrey R. and Austan Goolsbee, “Does the Internet Make Markets More Competitive? Evidence from the Life Insurance Industry,” The Journal of Political Economy, 2002, 10:3, 481-507.
Carney, Michael, “Costs and Pricing of Home Brokerage Services,” Journal of the American Real Estate and Urban Economics Association, 1982, 10:3, 331-354.
Colwell, Peter F. and David Marshall, “Market Share in the Real Estate Brokerage Industry,” Journal of the American Real Estate and Urban Economics Association, 1986, 14:4, 583-599.
Delcoure, Natalya and Norm Miller, “International Residential Real Estate Brokerage Fees and Implications for the US Brokerage Industry,” International Real Estate Review, 2002, 5:1, 12-39.
Dietrich, M. and P. Holmes, “The Market Structure of the Real Estate Agency Industry in the 1980’s: An Empirical Investigation,” Applied Economics, 1990, 22:5, 629-638.
Federal Trade Commission and U.S. Department of Justice. Competition in the Real Estate Brokerage Industry, April, 2007.
Forgey, Fred A., Walter E. Mullendore and Ronald C. Rutherford, “Market Structure in the Residential Real Estate Brokerage Market,” Journal of Real Estate Research, 1997, 14:1 107-115.
Hendel, Igal, Aviv Nero, and Francios Ortalo-Magne, “The Relative Performance of Real Estate Marketing Platforms: MLS versus FSBOMadision.com,” American Economic Review, 2009, 99:5, 1878-1898.
Hsieh, Chang-Tai and Enrico Moretti, “Can Free Entry Be Inefficient? Fixed Commision and Social Waste in the Real Estate Industry,” Journal of Political Economy, 2003, 111:5, 1076-1122.
Levitt, Steven D. and Chad Syverson, “Antitrust Implications of Outcomes when Home Sellers Use Flat-Fee Real Estate Agents,” Brookings-Wharton Papers on Urban Affairs, 2008, 9, 47-88.
National Association of Realtors, Structure, Conduct, and Performance of the Real Estate Brokerage Industry, November 2005.
Sawyer, Steve, “Local Real Estate Market Competition: Evidence and Insight from an Analysis of 12 Local Markets,” The Pennsylvania State University, (For National Center for Real Estate Research, Washington, DC), 2005.
U.S. Government Accountability Office, Real Estate Brokerage: Factors That May Affect Price Competition, August 2005.
Weicher, John C., “The Price of Residential Real Estate Brokerage Services: A Review of the Evidence, Such As It Is,” Real Estate Law Journal, 2006, 35, 119-144.
White, Lawrence, “The Residential Real Estate Brokerage Industry: What Would More Vigorous Competition Look Like?” New York University, Leonard N. Stern School of Business, Department of Economics, Working Papers Database, 2006.
Yinger, John, “A Search Model for Real Estate Broker Behavior,” American Economic Review, 1981, 71:4, 591-605.
Zumpano, Leonard V., “The Possible Consequences of Bank Entry into the Real Estate Brokerage Market: What the Research Tells Us,” Journal of Real Estate Literature, 2002, 10:2, 243-261.
Zumpano, Leonard V., Harold Elder, and Glenn E. Crellin, “The Market for Residential Real Estate Brokerage Services: Costs of Production and Economies of Scale,” Journal of RealEstate, Finance and Economics, 1993, 6:3, 237-250.
Zumpano, Leonard V. and Harold Elder, “Economies of Scope and Density in the Market for Real Estate Brokerage Services,” Journal of the American Real Estate and Urban Economics Association, 1994, 22:3, 497-513.