Institutional Investors and the U.S. Housing Recovery

Lauren Lambie-Hanson, Wenli Li and Michael Slonkosky

No 19-45, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: We study the house price recovery in the U.S. single-family residential housing market since the outbreak of the mortgage crisis, which, in contrast to the preceding housing boom, was not accompanied by a rise in homeownership rates. Using comprehensive property-level transaction data, we show that this phenomenon is largely explained by the emergence of institutional investors. By exploiting heterogeneity in a county?s exposure to local lending conditions and to government programs that a?ected investors? access to residential properties, we estimate that the increasing presence of institutions in the housing market explains over half of the increase in real house price appreciation rates between 2006 and 2014. We further demonstrate that institutional investors contribute to the improvement of the local housing market by reducing vacancy rates as they shorten the amount of time distressed properties stay in REO. Addition-ally, institutional investors help lower local unemployment rates by increasing local construction employment. However, institutional investors are responsible for most of the declines in the homeownership rates.

Keywords: Institutional investor; House Price; Homeownership; Foreclosure; Mortgage Crisis (search for similar items in EconPapers)
JEL-codes: G01 G12 G20 G28 R21 R31 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2019-11-13
New Economics Papers: this item is included in nep-ure
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Citations: View citations in EconPapers (2)

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DOI: 10.21799/frbp.wp.2019.45

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