NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Speculators and Middlemen: The Role of Intermediaries in the Housing Market

Patrick Bayer, Christopher Geissler, James W. Roberts

NBER Working Paper No. 16784
Issued in February 2011
NBER Program(s):   EFG   PE

We document and study the strategy and performance of two distinct types of investors in Los Angeles between 1988-2009 who purchased homes with the intention of quickly re-selling: middlemen buy at below-market prices from motivated sellers and re-sell quickly; speculators target periods and areas of rapid market appreciation. Unlike that of middlemen, speculative activity increased sharply in the housing boom and was strongly associated with subsequent price bubbles at both the metropolitan and neighborhood levels. We present evidence suggesting that speculation fueled excess short-term appreciation rather than reflected the ability of speculators to predict when and where such appreciation would occur.

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This paper was revised on May 22, 2013

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Document Object Identifier (DOI): 10.3386/w16784

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