NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Jeffrey P. Thompson

Federal Reserve Board
Washington, DC

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NBER Working Papers and Publications

January 2014When Real Estate is the Only Game in Town
with Hyun-Soo Choi, Harrison Hong, Jeffrey Kubik: w19798
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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