Do Buyer Incentives Work for Houses during a Real
Kenneth W. Soyeh
Jonathan A. Wiley
Ken H. Johnson
Published online: 31 October 2012
Springer Science+Business Media New York 2012
Abstract The impact of incentives on marketing duration is examined for residential
real estate using data from the Multiple Listing Service during a real estate downturn.
The focus is on incentives offered directly by sellers to potential homebuyers. The
evidence suggests that incentives are not capitalized into the selling price during the
softened market conditions. Alternatively, incentives are found to have a significant
reduction in marketing time, however this is found to be true only for closing costs
and not for other incentive classifications. The benefit of reduced expected market
time from offering incentives is quickly diminished when the seller initially over-
prices the listing by a large amount.
In mid-2010, the Wall Street Journal reported a nationwide inventory excess in the
U.S. housing markets of approximately 2.4 million units (Whelan 2010). The home-
ownership vacancy rate at the same point in time was 2.6 % for the nation. This was
within 30 basis points of the highest level of vacancy since tracking this statistic
began in 1956.
There is no evidence that the effects of this recent supply shock have
J Real Estate Finan Econ (2014) 48:380–396
Collected from housing vacancy data reported by the US Census Bureau. The highest homeownership
vacancy rate was 2.9 % in both 2008 and 2009. Pre-2007, this rate was never more than 2.2 %.
K. W. Soyeh
J. A. Wiley (*)
Department of Real Estate, J. Mack Robinson College of Business, Georgia State University, 35 Broad
St., Suite 1405, Atlanta, GA 30303, USA
K. W. Soyeh
K. H. Johnson
Department of Finance and Real Estate, Florida International University, 11200 SW 8th Street, MARC
230, Miami, FL 33199, USA