Sellers’ willingness to compromise on price – A novel index to identify pricing trends in the housing market

This paper offers a novel index to identify pricing trends in the housing market, based on the difference between sellers’ initial asking price and the final transaction price of the same property (the "Willingness to Compromise" Index). To construct this index, we use data from ``Yad2``, the leading classified ads website in Israel, on individual ads for real estate properties offered for sale and data reported by the Israel Tax Authority on final transactions. We then apply the index to 28,933 real-estate transactions in 28 Israeli cities between 2015 and 2017. Our analysis documents a significant increase in the willingness to compromise between the third quarter of 2016 and the third quarter of 2017. This increase was observed in nearly all cities in the sample, including when controlling for property characteristics. Our findings also suggest that the increase in willingness to compromise was greater in cities where lotteries associated with the government-subsidized ''Buyer’s Price'' project were held, compared with other cities.