Flips, Flops and Foreclosures: Anatomy of a Real Estate Bubble
32 Pages Posted: 14 Aug 2010 Last revised: 22 Oct 2010
Date Written: October 20, 2010
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: Suggested Citation