Orcun Morali holds a Ph.D. degree in Management (Finance) and an MBA degree from Bogazici University, a BSc. degree in Computer Science from Bilkent University. His research interests lies around behavioral and analytical studies regarding behavioral economics and finance, real estate finance and complex systems. His recent publications focus on the spatial dependence and spatial interactions in real estate. He has published in prominent journals and given talks in distinguished universities such as Yale University, Harvard University and NYU.

Abstract

Empirically, the cross-sectional distribution of real estate prices are heavily clustered at particular points which results in spikes in a histogram. A further examination of the prices also reveals that the use of detailed figures in pricing is uncommon, the prices are clustered around even figures. Since the real estate market is an important part of the economy and the real estate purchasing decision usually involves an important share of the wealth of the buyer, the existence of the tendency towards price clustering, its nature and economic impact is worthy of analysis. This study documents and formally shows the pricing anomaly in real estate markets regarding the tendency to use even numbers. Using novel data from multiple real estate markets, cognitive ease and negotiation processes is attributed as a possible explanation of the even pricing phenomena, while price-levels, information friction and taxes cannot fully explain it. Furthermore, charm pricing is attributed to a cultural effect. To our knowledge, this is the first study to investigate even pricing as a pricing anomaly in the real estate market.