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Economic Consequences of Housing Speculation

Author

Listed:
  • Zhenyu Gao
  • Michael Sockin
  • Wei Xiong

Abstract

By exploiting variation in state capital gains taxation as an instrument, we analyze the economic consequences of housing speculation during the U.S. housing boom in the 2000s. We find that housing speculation, anchored, in part, on extrapolation of past housing price changes, led not only to greater price appreciation, economic expansions, and housing construction during the boom in 2004-2006, but also to more severe economic downturns during the subsequent bust in 2007-2009. Our analysis supports supply overhang and local household demand as two key channels for transmitting these adverse effects.

Suggested Citation

  • Zhenyu Gao & Michael Sockin & Wei Xiong, 2019. "Economic Consequences of Housing Speculation," NBER Working Papers 26457, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:26457
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    Cited by:

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    2. Giacoletti, Marco & Parsons, Christopher A., 2022. "Peak-Bust rental spreads," Journal of Financial Economics, Elsevier, vol. 143(1), pages 504-526.
    3. Ma, Xutao & Zhang, Zhen, 2022. "Expectations, credit conditions, and housing boom-bust: Evidence from SVAR with sign and zero restrictions," Journal of Banking & Finance, Elsevier, vol. 134(C).
    4. Zhenyu Gao & Michael Sockin & Wei Xiong, 2020. "Learning about the Neighborhood," NBER Working Papers 26907, National Bureau of Economic Research, Inc.
    5. Daniel I. García, 2022. "Second‐home buying and the housing boom and bust," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(1), pages 33-58, March.

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    More about this item

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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