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

Author

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  • Patrick J. Bayer
  • Christopher Geissler
  • James W. Roberts

Abstract

In thinly traded markets for heterogenous, durable goods, such as housing, intermediaries may play especially important roles. Using a unique micro-level dataset of housing transactions in Los Angeles from 1988-2008 and a novel research design, we identify and measure the importance of two very distinct types of intermediaries, also known as "flippers". The first type act as middlemen who quickly match sellers and buyers, operate throughout housing market cycles and earn above average returns when they buy and sell. The second type act as speculators who attempt to time markets by holding assets for longer periods of time, perform relatively poorly when buying and selling and are strongly associated with price instability in their targeted areas. The presence of these unsophisticated speculators and positive feedback trading contribute the first pieces of evidence from the housing market to a growing body of work in other financial markets that questions whether speculators always act to stabilize prices.

Suggested Citation

  • Patrick J. Bayer & Christopher Geissler & James W. Roberts, 2011. "Speculators and Middlemen: The Role of Flippers in the Housing Market," Working Papers 11-03, Duke University, Department of Economics.
  • Handle: RePEc:duk:dukeec:11-03
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    Citations

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    Cited by:

    1. Yuming Fu & Wenlan Qian & Bernard Yeung, 2013. "Speculative Investors and Tobin's Tax in the Housing Market," NBER Working Papers 19400, National Bureau of Economic Research, Inc.
    2. Leung, Charles Ka Yui & Tse, Chung-Yi, 2017. "Flipping the Housing Market," Globalization and Monetary Policy Institute Working Paper 301, Federal Reserve Bank of Dallas.
    3. Kevin Haninger & Lala Ma & Christopher Timmins, 2017. "The Value of Brownfield Remediation," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 4(1), pages 197-241.
    4. Leung, Charles Ka Yui & Tse, Chung-Yi, 2017. "Flipping in the housing market," Journal of Economic Dynamics and Control, Elsevier, vol. 76(C), pages 232-263.
    5. Yuming Fu & Wenlan Qian, 2014. "Speculators and Price Overreaction in the Housing Market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 42(4), pages 977-1007, December.
    6. 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.
    7. Pablo Kurlat & Johannes Stroebel, 2015. "Testing for Information Asymmetries in Real Estate Markets," Review of Financial Studies, Society for Financial Studies, vol. 28(8), pages 2429-2461.
    8. Han, Lu & Strange, William C., 2015. "The Microstructure of Housing Markets," Handbook of Regional and Urban Economics, Elsevier.

    More about this item

    Keywords

    Speculation; Housing Markets; Asset Pricing; Behavioral Finance; Financial Intermediaries; Middlemen;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • 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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