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Speculators and Middlemen: The Strategy and Performance of Investors in the Housing Market

Author

Listed:
  • Patrick Bayer
  • Christopher Geissler
  • Kyle Mangum
  • James W Roberts
  • Andrew Karolyi

Abstract

Using data from the Los Angeles area from 1988 to 2012, we study the behavior and sources of returns of individual investors in the housing market. We document the existence of two distinct investor types. The first act as middlemen, purchasing substantially below and reselling above market prices throughout the cycle, improving liquidity and the existing capital stock in the process. The second act as speculators, who primarily enter during the boom, buying and selling at essentially market prices. Neither type anticipated the housing bust. We document similar behavior by speculators and middlemen in 96 other U.S. metro areas.

Suggested Citation

  • Patrick Bayer & Christopher Geissler & Kyle Mangum & James W Roberts & Andrew Karolyi, 2020. "Speculators and Middlemen: The Strategy and Performance of Investors in the Housing Market," The Review of Financial Studies, Society for Financial Studies, vol. 33(11), pages 5212-5247.
    • Handle: RePEc:oup:rfinst:v:33:y:2020:i:11:p:5212-5247.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhaa042
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    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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