Investors in Housing Markets: Comparing Two Booms

Abstract

We conduct a large-scale data analysis to compare housing investors in the periods before and after the Global Financial Crisis (GFC). Post-GFC investors differ from pre-GFC investors in several key ways: They are less likely to use leverage, are residents in wealthier and more educated areas, and are more sophisticated. They have a buy-and-hold strategy, are less likely to sell in response to capital gains and more likely to hold properties longer in response to rental yields. These differences have implications for market liquidity and monetary policy transmission sensitivity. Moreover, post-GFC investors are less susceptible to behavioral biases.

Keywords: Residential investment, rental yields, capital gains, mortgages, biases, housing, flipping.