Renegade Asset Markets

Posted: 1 Aug 2013

See all articles by Peter T. Chinloy

Peter T. Chinloy

American University - Department of Finance and Real Estate

Jonathan Wiley

Georgia State University

Date Written: July 30, 2013

Abstract

Local markets with tight land use controls result in prices rising relative to wages and affordability. Affordability is eased by unconventional but risky finance. Tight land use and loose financing in these renegade markets concentrates the impact of national or international shocks. A positive demand shock raises prices in these tight markets. If ongoing price momentum is expected, households switch to ownership and landlords reduce the rental stock. House prices, rents and occupancy rise and fall together in these markets. A five-equation sequential structure in land use, financial contracts, house prices, rents and vacancy for 17 United States cities confirms geographical concentration. Coastal California and South Florida are fundamentally risky markets. Discount rates there are three percentage points higher than the sample median. Two percentage points are attributable to land use and the other to unconventional finance. National and international financial crises are highly concentrated regionally.

Keywords: Financial crisis, Housing markets, Local concentration

Suggested Citation

Chinloy, Peter and Wiley, Jonathan, Renegade Asset Markets (July 30, 2013). Journal of Real Estate Finance and Economics, Vol. 47, No. 2, 2013. Available at SSRN: https://ssrn.com/abstract=2303801

Peter Chinloy

American University - Department of Finance and Real Estate ( email )

Kogod School of Business
4400 Massachusetts Ave., N.W.
Washington, DC 20016-8044
United States
202-885-1951 (Phone)
202-885-1992 (Fax)

Jonathan Wiley (Contact Author)

Georgia State University ( email )

35 Broad Street
Atlanta, GA 30303-3083
United States

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