Leaving Households Behind: Institutional Investors and the U.S. Housing Recovery

33 Pages Posted: 14 Jan 2019 Last revised: 29 Apr 2020

See all articles by Lauren Lambie-Hanson

Lauren Lambie-Hanson

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Wenli Li

Federal Reserve Bank of Philadelphia

Michael Slonkosky

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Date Written: 2019-01-07

Abstract

Ten years after the mortgage crisis, the U.S. housing market has rebounded significantly with house prices now near the peak achieved during the boom. Homeownership rates, on the other hand, have continued to decline. We reconcile the two phenomena by documenting the rising presence of institutional investors in this market. Our analysis makes use of housing transaction data. By exploiting heterogeneity in zip codes' exposure to the First Look program instituted by Fannie Mae and Freddie Mac that affected investors' access to foreclosed properties, we establish the causal relationship between the increasing presence of institutions in the housing market and the subsequent recovery in house prices and decline in homeownership rates between 2007 and 2014. We further demonstrate that institutional investors contributed to the improvement in the local labor market by reducing overall unemployment rate and by increasing total employment, construction employment in particular. Local housing rents also rose.

Keywords: housing, homeownership, mortgage crises

Suggested Citation

Lambie-Hanson, Lauren and Li, Wenli and Slonkosky, Michael, Leaving Households Behind: Institutional Investors and the U.S. Housing Recovery (2019-01-07). FRB of Philadelphia Working Paper No. 19-1. Available at SSRN: https://ssrn.com/abstract=3314570 or http://dx.doi.org/10.21799/frbp.wp.2019.01

Lauren Lambie-Hanson (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

HOME PAGE: http://sites.google.com/laurenlambiehanson

Wenli Li

Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

Michael Slonkosky

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

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