Housing Market Liquidity and Price Formation under Stochastic Bargaining: A Continuous-Time RDE Approach

Housing Market Liquidity and Price Formation under Stochastic Bargaining: A Continuous-Time RDE Approach | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Housing Market Liquidity and Price Formation under Stochastic Bargaining: A Continuous-Time RDE Approach Bilgi Yilmaz This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-9417512/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract This paper develops a continuous time Random Differential Equation framework for housing market execution with bargaining frictions, heterogeneous buyer valuations, and finite listing horizons. The model combines mean reverting seller price adjustment with asymmetric bid driven forcing to represent pathwise transaction dynamics and negotiation outcomes. We derive analytical results for price dynamics, execution conditions, and stability, and calibrate the framework using residential listings together with a synthetic pool of buyers. The calibrated model reproduces key stylized features of housing markets, including momentum, mean reversion, volatility clustering, and excess kurtosis. In the baseline simulation, listings execute with an average completion time of about 28 trading days. Counterfactual supply and demand experiments show that stronger buyer competition increases execution prices, whereas excess supply leads to failed negotiations and market freeze-out. Additionally, sensitivity analysis identifies a threshold beyond which price dispersion becomes unstable. The framework offers a tractable bridge between micro level bargaining and aggregate housing market outcomes. Housing Market Dynamics Random Differential Equations (RDE) Real Estate Liquidity Stochastic Execution Modeling Supply-Demand Elasticity Mean-Reversion Full Text Additional Declarations No competing interests reported. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. Our growing team is made up of researchers and industry professionals working together to solve the most critical problems facing scientific publishing. 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