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Flips, Flops and Foreclosures: Anatomy of a Real Estate Bubble

32 Pages Posted: 14 Aug 2010 Last revised: 22 Oct 2010

Craig A. Depken

University of North Carolina at Charlotte - The Belk College of Business Administration - Department of Economics

Harris Hollans

Auburn University - College of Business

Steve Swidler

Auburn University - College of Business

Date Written: October 20, 2010

Abstract

This paper examines the anatomy of a real estate bubble. In the process, we identify three phases of the market’s evolution: in the first phase, a large percentage of transactions are speculative or “flips” causing prices to rapidly increase; in phase two, flipping loses its profitability; and in phase three, there is an increasing number of foreclosures leading to falling prices. An illustration of this anatomy is provided by the evolution of the Las Vegas metropolitan housing market from 1994 through 2009. The descriptive analysis of the Las Vegas market is augmented with causality tests which show that prices were the driving force behind all three phases in the market’s evolution.

Keywords: Flipping, Mortgages, Foreclosure, Speculation, Real Estate

JEL Classification: G11, G21, R31

Suggested Citation

Depken, Craig A. and Hollans, Harris and Swidler, Steve, Flips, Flops and Foreclosures: Anatomy of a Real Estate Bubble (October 20, 2010). Available at SSRN: https://ssrn.com/abstract=1658008 or http://dx.doi.org/10.2139/ssrn.1658008

Craig A. Depken

University of North Carolina at Charlotte - The Belk College of Business Administration - Department of Economics ( email )

Charlotte, NC 28223
United States

Harris Hollans

Auburn University - College of Business ( email )

Department of Finance
303 Lowder Business Bldg.
Auburn University, AL 36849
United States
(334) 844-3009 (Phone)
(334)844-4960 (Fax)

Steve M. Swidler (Contact Author)

Auburn University - College of Business ( email )

Auburn, AL 36849
United States
334-844-3014 (Phone)
334 -844-4960 (Fax)

HOME PAGE: http://www.business.auburn.edu/~swidlst/

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