When Real Estate is the Only Game in Town

57 Pages Posted: 17 Jan 2014

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: January 2014

Abstract

Using data on household portfolios and mortgage originations, we find that households residing in a city with few publicly traded firms headquartered there are more likely to own an investment home nearby. Households in these areas are also less likely to own stocks. This only-game-in-town effect is more pronounced for households living in high credit quality areas, who can access financing to afford a second home. This effect also becomes pronounced for households living in low credit quality areas after 2002 when securitization made it easier for these households to buy second homes. Cities with few local stocks have in equilibrium higher price-to-rent ratios, making it more attractive to rent, and lower (primary residence) homeownership rates.

Suggested Citation

Choi, Hyun-Soo and Hong, Harrison G. and Kubik, Jeffrey D. and Thompson, Jeffrey P., When Real Estate is the Only Game in Town (January 2014). NBER Working Paper No. w19798. Available at SSRN: https://ssrn.com/abstract=2380431

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
Syracuse, NY 13244-1020
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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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