Sand States and the US Housing Crisis
Singapore Management University
Harrison G. Hong
Columbia University, Graduate School of Arts and Sciences, 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
April 11, 2016
The excesses of the historic US housing cycle of the 2000s were concentrated in the Metropolitan Statistical Areas (MSAs) of Arizona, California, Florida and Nevada. Even controlling for leading explanations of this housing cycle, these Sand State MSAs had more than double the mortgage originations, defaults and price fluctuations than other MSAs. We show that these excesses can be explained by Sand State MSAs having an abnormally low supply of publicly traded firms headquartered there relative to total income. Households in these MSAs are more likely to purchase investment homes nearby rather than stocks, amplifying the housing cycle there.
Number of Pages in PDF File: 56
Keywords: Sand States, US Housing Crisis, Investment Homes, Local Bias, Household Portfolio
JEL Classification: G1, G11, R2
Date posted: December 31, 2013 ; Last revised: April 13, 2016
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