Sand States and the US Housing Crisis

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

See all articles by Hyun-Soo Choi

Hyun-Soo Choi

KAIST College of Business

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

New England Public Policy Institute, Federal Reserve Bank of Boston; Federal Reserve Board of Governors

Multiple version iconThere are 2 versions of this paper

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)

KAIST College of Business ( email )

85 Hoegiro, Dongdaemoon-gu
Seoul
Korea, Republic of (South Korea)
8229583592 (Phone)

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
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Jeffrey D. Kubik

Syracuse University - Department of Economics ( email )

426 Eggers Hall
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315-443-9063 (Phone)
315-443-1081 (Fax)

Jeffrey P. Thompson

New England Public Policy Institute, Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
Boston, MA 02210
United States

Federal Reserve Board of Governors ( email )

Washington, DC 20551
United States

HOME PAGE: http://https://www.federalreserve.gov/econres/jeffrey-p-thompson.htm

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