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The Role of House Flippers in a Boom and Bust Real Estate Market

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  • Lee, Jin Man
  • Choi, Jin Wook

Abstract

The single-family house transactions data of the Chicago Metropolitan Statistical Area during the 1995–2010 period revealed that the peak flipper participation in the housing market occurred between 2004 and 2006 and they realized a higher return than long-term house holders, especially between 2000 and 2006 when the housing market boomed. However, flippers had higher risk than long-term holders. The estimation results of the multilevel mixed regression model showed that when more flippers entered the housing market, they created a positive upward movement in home price. The multivariate adaptive regression splines (MARS) model revealed a nonlinear relationship between housing prices and the fixed and variable effects of flipper participation in the housing market. Multiple knots indicated that flippers impacted the market differently as the frequency and magnitude of flipper participation in the housing market changed.

Suggested Citation

  • Lee, Jin Man & Choi, Jin Wook, 2011. "The Role of House Flippers in a Boom and Bust Real Estate Market," The Journal of Economic Asymmetries, Elsevier, vol. 8(2), pages 91-109.
    • Handle: RePEc:eee:joecas:v:8:y:2011:i:2:p:91-109
    DOI: 10.1016/j.jeca.2011.02.008
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    References listed on IDEAS

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    1. Clark, Steven P. & Coggin, T. Daniel, 2011. "Was there a U.S. house price bubble? An econometric analysis using national and regional panel data," The Quarterly Review of Economics and Finance, Elsevier, vol. 51(2), pages 189-200, May.
    2. Gordon W. Crawford & Michael C. Fratantoni, 2003. "Assessing the Forecasting Performance of Regime‐Switching, ARIMA and GARCH Models of House Prices," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 31(2), pages 223-243, June.
    3. Coleman IV, Major & LaCour-Little, Michael & Vandell, Kerry D., 2008. "Subprime lending and the housing bubble: Tail wags dog?," Journal of Housing Economics, Elsevier, vol. 17(4), pages 272-290, December.
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    Cited by:

    1. Choi, Jin Wook, 2013. "The 2007–2010 U.S. financial crisis: Its origins, progressions, and solutions," The Journal of Economic Asymmetries, Elsevier, vol. 10(2), pages 65-77.
    2. Al Refai, Hisham & Eissa, Mohamad Abdelaziz & Zeitun, Rami, 2021. "The dynamics of the relationship between real estate and stock markets in an energy-based economy: The case of Qatar," The Journal of Economic Asymmetries, Elsevier, vol. 23(C).
    3. Duran, Hasan Engin & Özdoğan, Hilal, 2020. "Asymmetries across regional housing markets in Turkey," The Journal of Economic Asymmetries, Elsevier, vol. 22(C).

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    More about this item

    Keywords

    House flippers; Real estates; Asymmetric information; Boom and bust; House price; MARS;
    All these keywords.

    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies

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