Investors Effect on Household Real Estate Affordability

40 Pages Posted: 5 May 2015 Last revised: 7 May 2015

Date Written: May 1, 2015

Abstract

We examine whether the recent behavior of real estate investors had an effect on housing affordability between 2007 and 2014. We analyze investors’ purchasing and selling behavior and study their spillover effects on the affordability of the local real estate market where they invest. We find that large portfolio investors decrease the affordability in neighborhoods, reselling a property bought at the 37th percentile at the 70th percentile of the market. We also find that in order to maximize yield, investors tend to invest in poorer neighborhoods, leading to a decrease in affordability for lower income population wanting to buy a property in these areas.

Keywords: Affordability, Investors, Housing, Resale, Mortgages, Signal, Valuation

JEL Classification: O18, R00, R33

Suggested Citation

Gay, Sebastien, Investors Effect on Household Real Estate Affordability (May 1, 2015). Kreisman Working Papers Series in Housing Law and Policy No. 22. Available at SSRN: https://ssrn.com/abstract=2602414 or http://dx.doi.org/10.2139/ssrn.2602414

Sebastien Gay (Contact Author)

The University of Chicago ( email )

Department of Economics
1126 East 59th Street
Chicago, IL 60637
United States
773-834-0887 (Phone)

HOME PAGE: http://www.sebastiengay.com

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