The 2005 – 2011 Housing Boom and Bust: Impacts on Housing Turn over and Implications for the Recovery

Abstract

The recent unprecedented house price boom and Great Recession have had unusual and unusually large effects on housing turnover. Nominal house prices plummeted and unemployment surged, causing housing turnover to plunge. We present an econometric model of the determinants of housing turnover for Chicago, Illinois. We use a unique database for 33 submarkets (PUMAs) of Cook County collected by the DePaul Institute for Housing Studies to measure the mortgage position of homeowners. We combine these mortgage data with PUMA data on demographic and economic variables and estimate a housing turnover relation. This relation is then used to simulate how the economic recovery affects housing turnover. The results are generalized to twelve U.S. metropolitan areas that have homeowner equity positions similar to regions in Cook County in late 2012.