Institutional Investors and the U.S. Housing Recovery

37 Pages Posted: 27 Nov 2019

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: 2019-11-13

Abstract

We study the house price recovery in the U.S. single-family residential housing market since the outbreak of the mortgage crisis, which, in contrast to the preceding housing boom, was not accompanied by a rise in homeownership rates. Using comprehensive property-level transaction data, we show that this phenomenon is largely explained by the emergence of institutional investors. By exploiting heterogeneity in a county’s exposure to local lending conditions and to government programs that affected investors’ access to residential properties, we estimate that the increasing presence of institutions in the housing market explains over half of the increase in real house price appreciation rates between 2006 and 2014. We further demonstrate that institutional investors contribute to the improvement of the local housing market by reducing vacancy rates as they shorten the amount of time distressed properties stay in REO. Additionally, institutional investors help lower local unemployment rates by increasing local construction employment. However, institutional investors are responsible for most of the declines in the homeownership rates.

Keywords: Institutional investor, House Price, Homeownership, Foreclosure, Mortgage Crisis

JEL Classification: G01, G12, G20, G28, R21, R31

Suggested Citation

Lambie-Hanson, Lauren and Li, Wenli and Slonkosky, Michael, Institutional Investors and the U.S. Housing Recovery (2019-11-13). FRB of Philadelphia Working Paper No. 19-45. Available at SSRN: https://ssrn.com/abstract=3494193 or http://dx.doi.org/10.21799/frbp.wp.2019.45

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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