Asymmetric framing effects and market familiarity: experimental evidence from the real estate market

ABSTRACT Buying a home may typically be the biggest lifetime purchase of any individual. People looking to purchase a home are bombarded with messages relating to the housing market every day and the framing of these messages has the potential to affect their purchase decisions. To examine these effects, an experiment was carried out with 620 participants who were divided into four groups, each presented with a different message scenario reflecting market familiarity and positive and negative framing. The findings indicate that framing effects are asymmetric in nature and could serve to prolong a housing market downturn within a property cycle. Pessimistic framing was found to lead homebuyers to perceive a more substantial decrease in housing prices, as compared to an optimistic framing which exhibited a significantly lesser increase. The study also suggests that such asymmetry is mitigated when individuals are more familiar with a market. The paper considers the implications of such framing by analysing residential property market data and demonstrates the existence of such asymmetric behaviour and how the market familiarity mitigates such behaviour.