Signaling Effects of Recurrent List-price Reductions on the Likelihood of House Sales

Recurrent list-price reductions of a house may signal a movement towards fair pricing or underpricing, and the impatience of sellers to enter a sell transaction more quickly. Recurrent list-price reductions may also provide a market signal that the listings are problematic and thus harder to sell in the absence of a list-price reduction. Considering the inter-dependence among recurrent list-price reductions and the dependence between the recurrent reductions and the sold event which bias the results from a standard survival analysis, this paper uses the joint frailty model to investigate the two conflicting signaling effects of list-price reductions on the likelihood of a house sale. Our novel dataset contains the time-dated recurrent list-price reductions for each house listed on the market. The results from the joint frailty model show time-varying negative impacts of list-price reductions on the likelihood of a house sale, supporting the negative signaling effects of recurrent list-price reductions.