Real research

As a university professor, Tim Allen has studied the residential real estate markets for more than two decades.

But as is sometimes the case, university research like Allen's sometimes languishes in economics journals. Allen is the Alico Chair in Financial Management in the economics department of Florida Gulf Coast University's Lutgert College of Business.

But Allen's research has great practical applications. For example, Allen and colleagues recently published research on the effects of certain marketing strategies such as open houses and virtual online tours on real estate prices, time on market and probability of sale.

Allen has also studied other variables on home prices. For example, he found that condo sale prices were significantly higher when buildings had no restrictions on pets such as dogs and cats. He also found that imposing age restrictions hurts home prices.

“There's a wealth of data for housing prices,” says Allen. But he cautions that the results are often dependent on location and whether the market is rising or falling. “Every real estate market is different.”

With that caveat, residential real estate developers and brokers might consider some of Allen's recent findings:

Residential real estate brokers use public open houses and broker open houses to help sell homes. Public open houses let the general public walk through the property and broker open houses are previously scheduled events to promote a property to other brokers.

In a study of 67,297 single-family home transactions in Dallas County, Texas, between 2004 and 2008, Allen and his colleagues found that broker open houses boosted home-sale prices by 3.3% to 3.6%. Because they're often scheduled in advance for groups of brokers, broker open houses are an efficient use of time for agents.

Public open houses had a positive effect on house prices, too, boosting them 1.7% to 2.1%. But public open houses may not be worth the effort for agents because they have to spend a day minding the home. For example, assuming a $200,000 price and a 3% commission for the listing broker, a public open house only generates an extra $120 for the broker even though it generates an extra $4,000 for the seller. “This suggests that open houses are worthwhile for the seller even if brokers in general do not believe they are beneficial,” Allen says in the study.

The Internet has become a significant tool for home sellers and their agents. “The Web has replaced driving around,” says Allen.

In a study of homes sold in Dallas County, Texas, between 2004 and 2008, Allen found that posting at least six online photos with a listing boosted home prices about 3.5%. For the average home price of $211,649, the impact of the six photos was $7,417, or about $1,200 a photo.

In the same study, Allen found that the positive price effect of a virtual online tour boosted home prices by 4%. “Listings with virtual tours have higher prices, experience less time on the market and are more likely to sell,” Allen concludes.

Allen and colleagues studied the price effects of pet restrictions on condominium prices in the Fort Lauderdale area from the first quarter of 2005 to the second quarter of 2007.

Pet owners should rejoice that the condos with pets allowed with no or some restrictions sold for 11.6% more than condos where no pets are allowed. In fact, condos with no restrictions at all had higher selling prices than those with any kind of restrictions.

“Overall, we can conclude that unrestricted pet policy creates a significant premium in condominium price,” Allen concludes. “Condominium developers and owner associations might well consider changing existing prohibitions against certain types of pets (or maintaining the status quo in the absence of such restrictions) in pursuit of enhanced property values in South Florida.”

Age-restricted communities are popular in Florida, but perhaps developers and buyers should consider Allen's recent research on Broward County condominium sales data for 2005 to 2007.

Allen and his colleagues concluded that age restrictions lower property values in part because it eliminates the younger segment of the population as buyers.

“In particular, we find that imposing age restriction on properties decreases housing prices by 17.9% during the period May 2005 to April 2006, while the discount is worse, 22.7%, during the later period May 2006 to May 2007,” Allen concludes.

In fact, Allen says age-restricted housing prices suffer more during a real estate downturn because older people are more sensitive to equity loss than younger people because of their shorter life spans.