Abstract
We show that profit-seeking institutional investors can provide valuable liquidity and spur the recovery of distressed housing markets. Using a quasi-natural experiment wherein investors purchased pre-packaged distressed home portfolios from the government-sponsored enterprises, we find that properties located within 0.25 miles of bulk-sold properties sell for 1.4% more than homes located farther away. This spillover effect is greater for foreclosed homes (4.3%), homes that are similar to the bulk-sold homes (2.5%), and homes in highly distressed neighborhoods (7.4%). Our results highlight asset disposition through pooling and institutional participation as a potential market-driven channel for the recovery of distressed housing markets.
Published Version
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