By: R. Safdar
Heterogeneity is one of the significant factors in choosing a house. This concept can be well defined as the housing value which is equal to the sum of values of its characteristics presenting the value which we pay at the market. These characteristics either are the functional features or the social features associated with the housing.
The hidden markets and hidden prices do exist and several pieces of evidence are available which highlighted the difficulty in estimation of these particular features. The house choosing analysis is based on the classical equilibrium pricing as it is based on the quality rather than the quantity. In this regards, market prices are defined as curves rather than points. There is a strong relationship between the offers/choices and the quality or price of the house.
Consumer behaviour for house selection is based on the economics such as house price, savings for housing and other goods. In this regard, saving has two meanings. One of the meanings is the saving to buy a house, while other is a house as a saving which means consumers assets. It is important for the consumer to know whether buying the selected house is a onetime expense or further money will be required for later days. Further, the house as an asset will maintain its price or not, benefit them in future or not are the questions which diverse their behaviour.
Another behavioural change in buying the house is a comparison of the new house with the previous house considering all house features. Different consumers have different living styles and perceptions which become a reason for a diverse opinion about the same house.
Real Estate Agents do optimization of these factors and develop relationships between the housing quality/features and pricing. Similarly, other factors such as location, nearby markets, schools, parks, hospitals, shopping centres and city interchanging facilities etc also play important role in optimizing the price of houses. The heterogeneity factor of the houses provides a bucket of characteristics to the consumers which become beneficial in several aspects.
The most important thing which can satisfy the consumers is providing of estimated loss aversion associated with the housing. Which means that this particular house may or may not results in loss of money after some time duration. This could facilitate the consumers to overcome their confusions and they can have a better decision based on the loyalty of the real estate agents towards them.