In order for all those home prices to end up on a list at the county recorder’s office, both buyers and sellers must agree on the exchange. The idea of revealed preferences tells us how the buyers are viewing, evaluating and reacting to, not only the physical characteristics and conditions of a home, but also what type of neighborhood infrastructure is in place to educate the kids, and to collect the trash, and to obtain potable water and so on. When price is equated against relevant quality indicators, a number will indicate what type of weight buyers put on each of these factors.
Now let’s think about the sellers. Sellers of course would like to secure the highest financial bid on their home. But this isn’t the only consideration. Since there is a four-to-six-week lag time between signing a purchase agreement and closing on the property, parties to the transaction consider the buyers’ level of earnestness, as it is a great disappointment should buyer’s remorse creep onto the scene. Sellers also take into account the financial viability of the buyers to be sure the lender will show up at the closing table with a suitcase full of cash.
A seller is no longer thinking about the public goods in their neighborhood because they are soon to exit the networks which rely on and participate in the production of those goods. But when they accept the money for the sale of their property, they are receiving payment for any participation they may have done over their residency. If they petitioned the city council for traffic-quieting-turn-abouts for safer streets or set up a tennis association to get people out exercising or led the kids out on a Trick-Can-Treat to gather up canned goods for the food shelf, it is at time of sale when they receive payment for their labor.
From my point of view, the equity in their home which accumulated during their ownership due to all these types of activities and investments is social capital.
Home Economics 