Second Home Buyers and the Housing Boom and Bust

Posted: 9 May 2019

See all articles by Daniel Garcia

Daniel Garcia

Board of Governors of the Federal Reserve System

Date Written: 2019-05-03


Record-high second home buying (homeowners acquiring nonprimary residences) was a central feature of the 2000s boom, but the macroeconomic effects remain an open question partly because reliable geographic data is currently unavailable. This paper constructs local data on second home buying by merging credit bureau data with mortgage servicing records. The identification strategy exploits the fact that the vacation share of housing from the 2000 Census is predictive of second home origination shares during the boom years, while also uncorrelated with other boom-bust drivers including proxies for local housing expectations, the use of alternative and PLS mortgages, and supply constraints. Localities with plausibly exogenous higher second home origination shares experienced a more pronounced boom and bust - stronger growth in construction and house prices during the boom, and steeper declines in activity during the recession years. Overall, second home buying could exp lain about 30 and 15 percent of the run-up in construction employment and house prices, respectively, over 2000-2006.

Keywords: Housing Boom, Mortgage, Supply, Property Investors, Second Home Buying, Speculation

JEL Classification: R31, R12, R21

Suggested Citation

Garcia, Daniel, Second Home Buyers and the Housing Boom and Bust (2019-05-03). FEDS Working Paper No. 2019-029. Available at SSRN: or

Daniel Garcia (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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