Institutional Housing Investors and the Great Recession

Dick Oosthuizen ()
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Dick Oosthuizen: https://economics.sas.upenn.edu/people/dick-oosthuizen

No 23-22, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: Before the Great Recession, residential institutional investors predominantly bought and rented out condos, but then they increased their market share of rental houses from 17 percent in 2001 to 28 percent in 2018. Along with this change, rental survey data show that the annual house operating-cost premium of institutional investors relative to homeowners fell from 44 percent in 2001 to 28 percent in 2015. To measure how these reduced costs affected the housing bust of 2007–2011, I build a heterogeneous agent model of the housing market featuring corporate investors and two types of dwellings: condos and houses. A transition experiment intended to replicate the Great Recession yields three results. First, house prices would have fallen by 1.6 percentage points more without the corporate-cost reduction. Second, the corporate-cost reduction can explain the fall in the homeownership rate. Third, the cost reduction produced a welfare gain of 0.4 percent for homeowners and 0.6 percent for individual investors.

Keywords: general equilibrium; housing; investors; housing prices; homeownership (search for similar items in EconPapers)
JEL-codes: D10 D31 E21 E30 E51 (search for similar items in EconPapers)
Pages: 97
Date: 2023-10-10
New Economics Papers: this item is included in nep-dge and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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DOI: 10.21799/frbp.wp.2023.22

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