Non-Primary Home Buyers, Shadow Banking, and the US Housing Market

IMF Working Papers, August 28, 2020

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Canonical URL: Non-Primary Home Buyers, Shadow Banking, and the US Housing Market

Dataset: proprietary and comprehensive dataset covering nearly 90 million residential transactions over 1998–2018.
Focus:
- Evolution of different types of investment purchases: short-term buyers, out-of-state buyers, and corporate cash investors.
- Quantification of contributions of non-primary home buyers to the housing cycle.
Key findings:
- The share of short-term investors grew substantially in the run-up to the global financial crisis (GFC), amplifying the boom-bust cycle.
- Out-of-state buyers propped up prices in some areas during the recession.
- An instrumental variable approach is employed to establish a causal relationship between housing investors and prices.
- The recent rise of shadow bank lending in the residential market is associated with riskier mortgages; implications for non-primary home buyers and effects on house prices and rents are explored.

Coverage: nearly 90 million residential transactions over 1998–2018.
Analytical approaches:
- Descriptive documentation of investor types and their evolution.
- Quantification of investor contributions to the housing cycle.
- Instrumental variable approach to identify causal effects of housing investors on prices.
- Examination of associations between shadow bank lending and mortgage risk.