Sand States and the US Housing Crisis

56 Pages Posted: 31 Dec 2013 Last revised: 13 Apr 2016

Hyun-Soo Choi

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

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Date Written: April 11, 2016

Abstract

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.

Keywords: Sand States, US Housing Crisis, Investment Homes, Local Bias, Household Portfolio

JEL Classification: G1, G11, R2

Suggested Citation

Choi, Hyun-Soo and Hong, Harrison G. and Kubik, Jeffrey D. and Thompson, Jeffrey P., Sand States and the US Housing Crisis (April 11, 2016). Available at SSRN: https://ssrn.com/abstract=2373179 or http://dx.doi.org/10.2139/ssrn.2373179

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

Columbia University, Graduate School of Arts and Sciences, Department of Economics ( email )

420 W. 118th Street
New York, NY 10027
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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