Some like it hot: The effect of auction temperature on urban real estate prices

Abstract

This study analyzes the impact of “auction temperature” – factors such as bid quantity, bidder count, and bid timing – on housing market transaction prices, utilizing a dataset of 15,288 Norwegian housing transactions from 2013 to 2019. Employing structural equation modeling, we demonstrate that auction temperature significantly influences final selling prices. Our findings indicate that strategic underpricing by sellers increases auction temperature but ultimately lowers the selling price. Conversely, for buyers, a high opening bid reduces auction temperature but increases the price. This research provides new insights into auction dynamics in real estate, assisting buyers and sellers in navigating these complex transactions.