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Institutional Investment, Asset Illiquidity and Post‐Crash Housing Market Dynamics

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  • Patrick S. Smith
  • Crocker H. Liu

Abstract

We examine institutional investors’ entry into the equity side of the single‐family detached housing market using an asset illiquidity framework. We find that institutional investors purchased owner‐occupied houses after the real estate crisis for approximately 6.3–11.8% less than owner‐occupiers. The large discount was in addition to distressed sale and cash purchase discounts which, when combined, highlight the low liquidation value for owner‐occupied housing. The results suggest that asset illiquidity is an important cost of leverage in the owner‐occupied housing market.

Suggested Citation

  • Patrick S. Smith & Crocker H. Liu, 2020. "Institutional Investment, Asset Illiquidity and Post‐Crash Housing Market Dynamics," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 48(3), pages 673-709, September.
    • Handle: RePEc:bla:reesec:v:48:y:2020:i:3:p:673-709
    DOI: 10.1111/1540-6229.12231
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    Cited by:

    1. Stephen B. Billings & Adam Soliman, 2023. "The erosion of homeownership and minority wealth," CEP Discussion Papers dp1967, Centre for Economic Performance, LSE.
    2. David M. Harrison & Michael J. Seiler & Liuming Yang, 2024. "The Impact of iBuyers on Housing Market Dynamics," The Journal of Real Estate Finance and Economics, Springer, vol. 68(3), pages 425-461, April.

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