Abstract
•Ratings designed to improve the transmission of financial information to consumers in the housing markets can be effective in affecting sales prices.•Effectiveness hinges, crucially, on the salience of ratings.•When effective, evidence suggests that ratings nudge consumers to pay attention to underlying financial risk associated with apartment purchases.•The rating effect varies significantly in size between sales administered by high- and lowquality real estate agents, indicating that intermediaries play a role in the transmission of rating information.
I study the effects of ratings designed to capture the financial risk associated with apartment ownership in Sweden. I find a discontinuous impact around rating thresholds on sales prices and real estate agents’ pricing decisions, but only after ratings started being displayed in online listings. This is not driven by changes in the number of bidders in apartment auctions. However, the magnitude of the rating effect is larger for sales administered by high- relative to low-quality real estate agents. My results suggest that ratings conveying financial information to consumers must ensure a high degree of salience to be effective. However, financial intermediaries remain likely to play a role in the transmission of such information.
