Work

How do assessed values affect the transaction prices of homes?

Year: 2025

Type: article

Abstract: Property taxes are commonly levied as a percentage of a home’s assessed value (AV). AVs should affect home prices through opposing channels. An unexpected increase in AV implies higher tax payments, which should hurt a home’s selling price (tax channel). On the other hand, the increase should have a positive effect since AVs serve as reference prices (anchoring channel). In a quasi-experimental setting exploiting geographic variations in AV-publication dates and reassessment frequencies, we find that a higher AV leads to a lower transaction price, indicating that the tax channel prevails. Disentangling the aggregate effect, we document that empirically, the anchoring channel does not play a major role. Our results thus suggest an exacerbation of previously documented inequities caused by taxation.

Source: Journal of Banking & Finance

DOI: 10.1016/j.jbankfin.2025.107610

Authors: Marcel Fischer, Patrick Hauf, Simon Stehle

Institutions: Copenhagen Business School, University of Konstanz, ZHAW Zurich University of Applied Sciences, Wüest Partner (Switzerland)

Language: English

Topic: Housing Market and Economics

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $3,340