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Desperate House Sellers: Distress among Developers

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  • Eileen van Straelen

Abstract

I identify the effect of financial constraints on product prices using granular data on home-builder housing developments from the 2006–2009 housing crisis. Builders who experience losses in one area subsequently sell homes in unaffected areas at a discount to raise cash quickly. When builders cut prices, they sell homes faster and builders cut prices more in areas in which price cuts produce larger declines in time-to-sale. Financially constrained firms are more likely to cut prices of homes in healthy areas following losses elsewhere. Firms cut prices following losses in other projects only during the crisis, not during the boom.

Suggested Citation

  • Eileen van Straelen, 2024. "Desperate House Sellers: Distress among Developers," The Review of Financial Studies, Society for Financial Studies, vol. 37(3), pages 802-836.
    • Handle: RePEc:oup:rfinst:v:37:y:2024:i:3:p:802-836.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhad076
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    More about this item

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • G01 - Financial Economics - - General - - - Financial Crises
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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