Desperate House Sellers: Distress Among Developers

Eileen van Straelen
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Eileen van Straelen: https://www.federalreserve.gov/econres/eileen-van-straelen.htm

No 2021-065, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Using granular data on home builder housing developments from the 2006-09 housing crisis, I show that builders spread house price shocks across geographically distinct projects via their internal capital markets. Builders who experience losses in one area subsequently sell homes in unaffected areas at a discount to raise cash quickly. Financially constrained firms are more likely to cut prices of homes in healthy areas in response to losses in unhealthy ones. Firms also smooth shocks across projects only during the crisis and not during the boom. These results together suggest firm internal capital markets spread negative economic shocks across space.

Keywords: Internal capital markets; Financial crises; Financial constraints; Housing markets; Product pricing (search for similar items in EconPapers)
JEL-codes: E30 G01 G30 G31 R30 (search for similar items in EconPapers)
Pages: 68 p.
Date: 2021-10-13
New Economics Papers: this item is included in nep-cfn, nep-fdg, nep-mac and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2021-65

DOI: 10.17016/FEDS.2021.065

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