The role of buy-side anchoring bias: Evidence from the real estate market

We examine anchoring bias within the real estate market by evaluating evidence and a priori arguments on the effects of investor sentiment on willingness-to-pay among homebuyers. Based upon a unique dataset which provides the complete histories of transactions in the real estate market, our findings reveal that the anchoring phenomenon prevails regardless of homebuyer's gender. Homebuyers faced with higher systemic uncertainty and out-of-state housing transactions exhibit higher levels of anchoring the heuristic thinking biased on investors' willingness-to-pay gives rise to the deviations from reasonable housing values.