Abstract

http://ssrn.com/abstract=2373179
 


 



When Real Estate is the Only Game in Town


Hyun-Soo Choi


Singapore Management University

Harrison G. Hong


Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

Jeffrey D. Kubik


Syracuse University - Department of Economics

Jeffrey P. Thompson


Federal Reserve Board; University of Massachusetts Amherst

July 24, 2015


Abstract:     
We show that the well-documented local bias of investors is helpful for understanding investment home purchases and house price fluctuations. Households living in high FICO (prime) zip codes within a Metropolitan Statistical Area (MSA) are less likely to own investment homes nearby and more likely to own stocks than their low FICO (subprime) counterparts. But in MSAs with few publicly traded firms headquartered there, even households in prime zip codes tilt their portfolios toward investment homes. Our only-game-in-town effect helps explain a previously puzzling aspect of the recent US Housing Crisis, namely why large MSAs like Phoenix and Las Vegas, even with high housing supply elasticities, nonetheless experienced significant price fluctuations.

Number of Pages in PDF File: 56

Keywords: Investment Homes, Local Bias, US Housing Crisis

JEL Classification: G1, G11


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Date posted: December 31, 2013 ; Last revised: August 5, 2015

Suggested Citation

Choi, Hyun-Soo and Hong, Harrison G. and Kubik, Jeffrey D. and Thompson, Jeffrey P., When Real Estate is the Only Game in Town (July 24, 2015). Available at SSRN: http://ssrn.com/abstract=2373179 or http://dx.doi.org/10.2139/ssrn.2373179

Contact Information

Hyun-Soo Choi (Contact Author)
Singapore Management University ( email )
Lee Kong Chian School of Business
50 Stamford Road
Singapore 178899, 178899
Singapore
Harrison G. Hong
Princeton University - Department of Economics ( email )
Princeton, NJ 08544-1021
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Jeffrey D. Kubik
Syracuse University - Department of Economics ( email )
426 Eggers Hall
Syracuse, NY 13244-1020
United States
315-443-9063 (Phone)
315-443-1081 (Fax)
Jeffrey P. Thompson
Federal Reserve Board ( email )
Washington, DC
United States
University of Massachusetts Amherst ( email )
Department of Operations and Information Managemen
Amherst, MA 01003
United States
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