NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

When Real Estate is the Only Game in Town

Hyun-Soo Choi, Harrison Hong, Jeffrey Kubik, Jeffrey P. Thompson

NBER Working Paper No. 19798
Issued in January 2014, Revised in January 2014
NBER Program(s):AP

Using data on household portfolios and mortgage originations, we find that households residing in a city with few publicly traded firms headquartered there are more likely to own an investment home nearby. Households in these areas are also less likely to own stocks. This only-game-in-town effect is more pronounced for households living in high credit quality areas, who can access financing to afford a second home. This effect also becomes pronounced for households living in low credit quality areas after 2002 when securitization made it easier for these households to buy second homes. Cities with few local stocks have in equilibrium higher price-to-rent ratios, making it more attractive to rent, and lower (primary residence) homeownership rates.

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Document Object Identifier (DOI): 10.3386/w19798

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