What determines how far a real-estate agent will drive to show a house?

Pricey Gas Leads to Lower Home Prices 
by: Adam Bonislawski
Oct 23, 2015
Click here to view the full article on WSJ.com

TOPICS: Supply and Demand

SUMMARY: When the cost to fill a tank is high, real-estate agents won't drive as far to market a property, concludes a paper by two universities. From the related article: "A recent study in the Journal of Housing Research from faculty at Longwood University in Farmville, Va., finds that for every mile between a property and its listing agent's office, average time on the market goes up 0.36% and the overall likelihood of selling goes down 0.5%. To put that in more concrete terms: Taking two equivalent houses-one down the block from its listing agent and the other 15 miles away-the one farther away will take roughly 5% longer to sell and has a 7.5% lower chance of selling at all." Evidently, according to the author's new paper, as gasoline prices increase, this distance-from-the-office effect is exacerbated.

CLASSROOM APPLICATION: Students can evaluate the effect of gasoline prices on the willingness of real estate agents to show homes that are further from their offices and therefore on the prices of these homes. One interesting issue is whether this gasoline-price effect is larger for younger real estate agents.

QUESTIONS: 
1. (Introductory) What is the effect of an increase gasoline prices on the willingness of real estate agents to show homes?

2. (Advanced) When deciding whether to show homes that are closer to their offices or ones that are further away, why would less-experienced agents be more influenced than experienced ones by increases in gasoline prices?

3. (Advanced) What is the effect of increases in gasoline prices on homes that are closer to job centers and ones that are further from job centers?