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Flippers in Housing Market Search

  • Charles Ka Yui Leung

    (City Univ. of Hong Kong)

  • Chung-Yi Tse

    (University of Hong Kong)

We add flippers-specialist investors who attempt to profit from buying low and selling high to a canonical housing market search model. These agents facilitate the turnover of mismatched houses on behalf of end-users and they may survive even if they face an arbitrarily large cost of financing vis-a-vis ordinary households. Multiple equilibrium may exist. In one equilibrium, most, if not all, transactions are intermediated by flippers, resulting in rapid turnover, a high vacancy rate, and high housing prices. In another equilibrium, few houses are bought and sold by these agents. Turnover is sluggish, few houses are vacant, and prices are moderate. When flippers face a lower cost of financing, their presence can, rather unexpectedly, decline. There may then be lower, not higher, housing prices to follow an interest rate decline.

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Paper provided by Society for Economic Dynamics in its series 2012 Meeting Papers with number 434.

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Date of creation: 2012
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Handle: RePEc:red:sed012:434
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
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