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Speculators and Middlemen: The Role of Intermediaries in the Housing Market

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  • Patrick Bayer
  • Christopher Geissler
  • James W. Roberts

Abstract

We document and study the strategy and performance of two distinct types of investors in Los Angeles between 1988-2009 who purchased homes with the intention of quickly re-selling: middlemen buy at below-market prices from motivated sellers and re-sell quickly; speculators target periods and areas of rapid market appreciation. Unlike that of middlemen, speculative activity increased sharply in the housing boom and was strongly associated with subsequent price bubbles at both the metropolitan and neighborhood levels. We present evidence suggesting that speculation fueled excess short-term appreciation rather than reflected the ability of speculators to predict when and where such appreciation would occur.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16784.

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Date of creation: Feb 2011
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Handle: RePEc:nbr:nberwo:16784

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  1. De Long, J. Bradford & Shleifer, Andrei & Summers, Lawrence H. & Waldmann, Robert J., 1990. "Noise Trader Risk in Financial Markets," Scholarly Articles 3725552, Harvard University Department of Economics.
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Cited by:
  1. Yuet-Yee Wong & Randall Wright, 2011. "Buyers, Sellers and Middlemen: Variations on Search-Theoretic Themes," NBER Working Papers 17511, National Bureau of Economic Research, Inc.
  2. Andrew Haughwout & Donghoon Lee & Joseph Tracy & Wilbert van der Klaauw, 2011. "Real estate investors, the leverage cycle, and the housing market crisis," Staff Reports 514, Federal Reserve Bank of New York.
  3. Charles Ka Yui Leung & Chung-Yi Tse, 2012. "Flippers in Housing Market Search," 2012 Meeting Papers 434, Society for Economic Dynamics.
  4. Todd Sinai, 2012. "House Price Moments in Boom-Bust Cycles," NBER Chapters, in: Housing and the Financial Crisis, pages 19-68 National Bureau of Economic Research, Inc.
  5. Fernando Ferreira & Joseph Gyourko, 2011. "Anatomy of the Beginning of the Housing Boom: U.S. Neighborhoods and Metropolitan Areas, 1993-2009," NBER Working Papers 17374, National Bureau of Economic Research, Inc.

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