Do as essay, not as I do? How inflated list prices of unsold essayer homes affect the price discovery process

In the United States real estate market, around 30% of listed properties remain unsold. Moreover, these unsold properties are typically listed far above fair market value (8.1%). We examine the extent to which overpriced property listings exert externalities on list and sale prices in the residential housing market. Our results show that overpriced listings exert spillover effects that distort and inflate housing prices. They increase other properties' list prices, on average, by $39,086 (5.3%) and increase sale prices by $35,688 (5%). We also find that the extent of over‐pricing depends on the economic environment, specifically, overpricing is higher (lower) during booms (busts).