Real estate investors and the U.S. housing recovery

Abstract

U.S. house prices fell nearly 30% between 2006 and 2012. Meanwhile, homeownership rates declined as mortgage credit supply tightened and investors bought up properties. Although nationally house prices recovered to prebust levels by 2016, homeownership rates declined through mid-2016, as investors, particularly those purchasing through corporations, gained market share. By exploiting heterogeneity in zip codes' exposure to Fannie Mae and Freddie Mac programs that affected investors' access to foreclosed properties, we find that increased presence of investors explains a significant fraction of the house price recovery. Investors reduced vacancies and shortened the time foreclosed properties spent in bank ownership.

The economic effects of real estate investors

“…We show that 1 standard deviation higher purchases by SMREI leads to 1.37 percentage points (pp) higher housing price growth for the median house, consistent with the findings of Allen et al ( 2018), Mills et al (2019), andLambie-Hanson et al (2022). Contrary to what is common belief, the impact in most areas is entirely driven by small-and medium-sized and local investors.…”

“…Third, we control for the change in the share of foreclosures in each MSA. Foreclosed properties are likely to attract investors because of lower prices, and at the same time they might restrict access to investors in some areas through the Fannie Mae and Freddie Mac First Look programs (Lambie‐Hanson et al., 2022). This analysis uses a restricted sample of 84 MSAs for which we have foreclosure data from Zillow for years 2008 to 2017.…”

“…(2019), and Lambie‐Hanson et al. (2022). Contrary to what is common belief, the impact in most areas is entirely driven by small‐ and medium‐sized and local investors.…”

“…Graham (2020) studies implications of the investors during the housing bust of the 2000s, and Lambie‐Hanson et al. (2022) during the recovery from the Great Recession. Garriga et al.…”

Gun‐ownership disclosure and localized home prices

“…Anenberg and Kung (2014) tried to disentangle two sources, competition and disamenities, and found that the competitive pressure that a foreclosed property exerts on nearby sellers is an important source of the spillover effect. There are a few studies on the spillover effect on home values from new market participants and literature argues that the entrance of both individual investors (Bayer et al, 2020;Chinco & Mayer, 2016) and institutional investors (D'Lima & Schultz, 2021;Ganduri et al, 2019;Lambie-Hanson et al, 2022), such as buy-to-rent institutions, has a positive effect on home prices. Moreover, the recent presence of iBuyers in the housing market provides liquidity, increases residential mobility (Buchak et al, 2020), and pushes up local housing prices (Harrison et al, 2023).…”