On the role of public price information in housing markets

This paper studies the impact of disclosing detailed house price information on the functioning of the housing market. We first study the effects of increased information on market outcomes in a theoretical framework where sellers are uncertain about the demand their house faces. We argue that increased information is more valuable to sellers who underestimate the value of their house than to sellers who overestimate the value of their house. Because of this asymmetry, house price information leads to higher prices. If more detailed information also improves matching in the housing market, higher prices may be accompanied by shorter time on the market. In the empirical part of the paper, we utilize a Finnish policy intervention to estimate these effects. In 2007, a website with detailed information about individual housing transactions in part of the country was opened. Differences-in-Differences estimation results suggest that increased information on past transactions led to higher prices and faster sales. (C) 2015 Elsevier B.V. All rights reserved.