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Institutional Investors and the U.S. Housing Recovery

Author

Listed:
  • Lauren Lambie-Hanson
  • Wenli Li
  • Michael Slonkosky

Abstract

We study the house price recovery in the U.S. single-family residential housing market since the outbreak of the mortgage crisis, which, in contrast to the preceding housing boom, was not accompanied by a rise in homeownership rates. Using comprehensive property-level transaction data, we show that this phenomenon is largely explained by the emergence of institutional investors. By exploiting heterogeneity in a county?s exposure to local lending conditions and to government programs that a?ected investors? access to residential properties, we estimate that the increasing presence of institutions in the housing market explains over half of the increase in real house price appreciation rates between 2006 and 2014. We further demonstrate that institutional investors contribute to the improvement of the local housing market by reducing vacancy rates as they shorten the amount of time distressed properties stay in REO. Addition-ally, institutional investors help lower local unemployment rates by increasing local construction employment. However, institutional investors are responsible for most of the declines in the homeownership rates.

Suggested Citation

  • Lauren Lambie-Hanson & Wenli Li & Michael Slonkosky, 2019. "Institutional Investors and the U.S. Housing Recovery," Working Papers 19-45, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpwp:19-45
    DOI: 10.21799/frbp.wp.2019.45
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    Citations

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    Cited by:

    1. Rohan Ganduri & Steven Chong Xiao & Serena Wenjing Xiao, 2023. "Tracing the source of liquidity for distressed housing markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 51(2), pages 408-440, March.
    2. Carlos Garriga & Athena Tsouderou & Pedro Gete, 2019. "Housing Dynamics without Homeowners. The Role of I," 2019 Meeting Papers 1407, Society for Economic Dynamics.

    More about this item

    Keywords

    Institutional investor; House Price; Homeownership; Foreclosure; Mortgage Crisis;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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