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Externalities of residential property flipping

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  • Lingxiao Li
  • Abdullah Yavas
  • Bing Zhu

Abstract

This study investigates whether flipping activities impose an externality on the transaction prices of the neighboring nonflipped properties. Using a data set of residential property transactions in Clark County, Nevada for the period 2003–2013, we find that flippers impose a significant positive impact on the price of neighboring nonflipped properties in an up market, but a significant negative effect in a down market. This procyclical impact of flipping activity contributes to the volatility of housing prices, hence magnifying boom and bust cycles and increasing the likelihood of a mortgage crisis.

Suggested Citation

  • Lingxiao Li & Abdullah Yavas & Bing Zhu, 2023. "Externalities of residential property flipping," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 51(1), pages 233-271, January.
    • Handle: RePEc:bla:reesec:v:51:y:2023:i:1:p:233-271
    DOI: 10.1111/1540-6229.12413
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