This document discusses characteristics of perfectly competitive housing markets and factors that determine real estate prices and time on the market. It notes that housing markets do not typically exhibit all characteristics of perfect competition. Real estate prices are usually predictable based on demand and supply, though intermediaries sometimes artificially influence markets by spreading myths. The length of time a property stays on the market depends both on general economic conditions, which impact buyer and seller financial situations, as well as microeconomic factors related to individual transactions. Markets usually see turnover every 15-20 years.

1. 1. What are the main characteristics of perfectly competitive markets? Do housing markets share
these characteristics? (see Campbell, Giglio, and Pathak 2011,scroll down to the bottom)
2. Explain the determinants of supply and demand of real estate properties. Are real estate prices
predictable? What are typical causes of bubbles on real estate markets?
3. What are the factors determining how long a property stays on the market? Address general
market conditions as well as microeconomics factors affecting buyers’ and sellers’ decisions.
http://www.jchs.harvard.edu/sites/jchs.harvard.edu/files/w09-4_pathak.pdf
Solution
1. characteristics of a perfectly competitive market:
there are many buyers and sellers in the market
all products are homogenious in nature
free float of information to the buyers
there are no entry and exit barriers to the sellers
absence of transportation cost
2. usually, the real estate market is a market which should have a study growth in the market. but
because of many factors, the market is becomes unpredictable in reality. there are many middle
man who creates artifical boom in market and they are creating fears about the market. the
demand will be in a normal position in normal conditions, but the brokers and intermediaries are
creating many myths and dominating the market.
the demand is constant in this market and supply is stable. there is no chance to expect high
supply, because the land is fixed irrespective of conditions in nations.
3. when ever the market and economic conditions are changes then automatically the financial
conditions of people also changes. people will show interest to sell their holdings at higher prices
and there will be some one who interested to own it at the prices. usually it may take around 15
years to 20 years