Flips, flops and foreclosures: anatomy of a real estate bubble

Abstract

If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractPurpose -This paper aims to examine the anatomy of a real estate bubble. In the process, the paper identifies three phases of the market's evolution: flips, flops and foreclosures. An examination of the Las Vegas real estate market illustrates the three phases. Design/methodology/approach -The paper examines transaction data from the metropolitan Las Vegas area (Clark County) from 1994 to 2009. The first part of the analysis identifies the three phases of the bubble and is descriptive in nature. This is followed by more formal tests of Granger causality. Findings -In the early part of the sample, a large percentage of transactions are speculative or "flips" causing prices to rapidly increase. Eventually, flipping loses its profitability and over the last three years, there is an increasing number of foreclosures leading to falling prices. The descriptive analysis of the Las Vegas market is augmented with causality tests which show that prices were the driving force behind all three phases in the market's evolution.Research limitations/implications -Future research might focus on underlying structural inter-temporal relationships to augment the Granger causality tests. Practical implications -Analysis shows that price is the driving force behind a bubble and that loan modification programs alone will not solve the current housing crisis. Social implications -Government entities might expand neighborhood stabilization programs to affect both demand and supply of homes. Moreover, it might be prudent to include information related to flipping on multiple listing service agreements. Additionally, local governments should be consistent in their record keeping. Originality/value -To the best of the authors' knowledge, this is the first paper to examine the housing bubble using an extensive set of transaction data.

Coming of Age: Renovation Premiums in Housing Markets

“…A related explanation is shifts in investment motives and levels of exuberance. Depken et al (2011) estimates that in a boom phase, a large percentage of transactions are speculative or "flips" in Las Vegas, US, while this share is highly reduced in a bust.…”

The Effects of Transaction Hotspots and Flipping Hotspots on Housing Prices

“…Flipping in the housing market describes when an investor purchases a property for a relatively low price, sometimes conducts rehabilitation or renovation activities and then sells the property at a profit (Depken et al, 2009). Some studies, such as Depken et al (2011) and LaCour-Little and Yang (2023), indicate that flipping in the housing market often drives up prices rapidly and causes volatile turnover (Leung et al, 2019), which is not conducive to the sound development of the housing market and does not help meet the living needs of the people. Anacker and Schintler in which point events (here, housing transactions) occur completely at random.…”