Working Paper: NBER ID: w16784
Authors: Patrick Bayer; Christopher Geissler; Kyle Mangum; James W. Roberts
Abstract: Housing market transactions are a matter of public record and thus provide a rare opportunity to analyze the behavior, performance, and strategies of individual investors. Using data for all housing transactions in the Los Angeles area from 1988-2009, this paper provides empirical evidence on investor behavior that is consistent with several rationales for speculative investment in the finance literature, including the roles of middlemen and naïve speculators. Speculative activity by novice investors increased sharply in the recent housing boom. These investors earned little more than the market rate of appreciation and demonstrated no ability to foresee market price movements.
Keywords: housing market; investor behavior; speculation; middlemen; real estate
JEL Codes: E3; G01; G12; G14; G28; H7; R0; R21; R31; R51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| influx of novice investors (G40) | rise in housing prices (R31) |
| novice investors (G11) | speculative investment (D84) |
| experienced flippers (G41) | market efficiency (G14) |
| novice investors' lack of experience and information (G41) | housing bubble (R31) |
| novice investors (G11) | trend-chasing behavior (C92) |