The Pricing of Housing and Mortgage Services for First-Time Versus Repeat Homebuyers

Abstract

This study examines efficiency in the pricing of housing and mortgage services across first-time and repeat homebuyers. A logit model is used to test a number of variables for significant differences across first-time buyers and repeat buyers for a sample of brokered real estate sales. The results show that the housing market is somewhat less than completely efficient in providing its services. The logit results for the adjustable-rate mortgage segment show that first-time homebuyers are more likely to be associated with a higher sale price per square foot and higher discount points than repeat buyers. The results show that first-time homebuyers tend to be younger and have less household income than repeat homebuyers. For the full sample of data, the results show that higher sale price/square foot ratios and lower downpayment/sale price ratios are more likely to be associated with first-time homebuyers. For the fixed-rate mortgage segment of the data, the only distinguishing variables are downpayment/sale price and buyer age (both lower for first-time homebuyers). Type of buyer cannot be distinguished by sale price/square foot, contract interest rate, discount points, and other variables. For the adjustable-rate mortgage segment of the data, type of buyer can be distinguished by sale sprice/square foot (higher for first-time buyers), downpayment/sale price (lower for first-time buyers), and discount points (higher for first-time buyers).