The Bargaining and Contagion Effects of Investors in Single Family Residential Properties: The Case of Denver Colorado

57 Pages Posted: 3 Jun 2020

See all articles by Jeffrey Cohen

Jeffrey Cohen

University of Connecticut - School of Business

John P. Harding

University of Connecticut - School of Business - Center for Real Estate and Urban Economic Studies

Date Written: May 6, 2020

Abstract

We study the bargaining power of investors and the contagion effects of investor-owned single family homes on nearby property values. By controlling for the characteristics of both buyers and sellers, we find that investors tend to have more bargaining power than owner-occupiers — they purchase at lower prices and sell at higher prices, all else equal. We identify two types of investors: Professional Investors (e.g., corporations and partnerships) and Individual Investors. We find differences in the behavior of these two types of investors. For example, Individual Investors tend to invest in homes similar in terms of unobserved quality to those purchased by owner- occupiers. The tendency to buy lower quality homes is primarily attributable to Professional Investors. We also find that Professional Investors have more bargaining power than Individual Investors. For the contagion analysis, we use a repeat sales methodology and find that increasing ownership by investors in a neighborhood is associated with a small positive effect on nearby property values.

Keywords: investor-owned housing, bargaining power, contagion

JEL Classification: R

Suggested Citation

Cohen, Jeffrey and Harding, John P., The Bargaining and Contagion Effects of Investors in Single Family Residential Properties: The Case of Denver Colorado (May 6, 2020). Available at SSRN: https://ssrn.com/abstract=3593980 or http://dx.doi.org/10.2139/ssrn.3593980

Jeffrey Cohen (Contact Author)

University of Connecticut - School of Business ( email )

368 Fairfield Road
Storrs, CT 06269-2041
United States

John P. Harding

University of Connecticut - School of Business - Center for Real Estate and Urban Economic Studies ( email )

2100 Hillside Road
Unit 1041RE
Storrs, CT 06269-2041
United States
860-486-3227 (Phone)
860-486-0349 (Fax)

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