Reference Points in the Housing Market ⇤ Ste ↵

Using comprehensive and granular Danish data, we revisit the determinants of decisions to list, and listing premia in the housing market. Nominal losses and down-payment constraints both a↵ect the gap between listing prices and hedonic valuations; we discover that these determinants have interactive e↵ects on household behavior. To explain these facts, we adopt a structural approach—sellers optimize expected utility from property sale, subject to down-payment constraints, and taking as given the “concave demand” of buyers (the probability of sale more steeply declines with positive listing premia than it rises with negative premia). A model with reference-dependent—but not necessarily loss-averse—preferences combined with penalties associated with down-payment constraints fits best, but cannot fully explain the new facts that we uncover. ⇤We thank Jan David Bakker, Pedro Bordalo, John Campbell, Joshua Coval, Andreas Fuster, Arpit Gupta, Adam Guren, Chris Hansman, Andrei Shleifer, Jeremy Stein, Ansgar Walther, Joshua White, and seminar participants at the FCA-Imperial Conference on Household Finance, the CBS Doctoral Workshop, the Bank of England, and the King’s College Conference on Financial Markets for useful comments. †Copenhagen Business School, Email: san.fi@cbs.dk. ‡National University of Singapore, Email: cristian.badarinza@nus.edu.sg §Imperial College London, Email: l.liu16@imperial.ac.uk. ¶Copenhagen Business School, Email: jma.fi@cbs.dk. kCorresponding author: Imperial College London, Tanaka Building, South Kensington Campus, London SW7 2AZ, and CEPR. Tel.: +44 207 594 99 10. Email: t.ramadorai@imperial.ac.uk.