The Department of Economics Applied Microeconomics Seminar Series presents
"Interconnected Markets: The Impact of Foreclosures on Rental Rates"
with George Saioc, Economics Graduate Student, UCI
Tuesday, November 27, 2012
Social Science Plaza B, Room 3266 (Econ Library)
The sudden rise in foreclosures during the Great Recession led many defaulters to seek living space in the rental market. This talk looks at whether elevated numbers of homes in the final stages of the foreclosure process, which would be associated with a surge in households seeking rental housing, leads to changes in the price of rental units. To answer this question, the study draws upon a reduced-form framework that controls for changing characteristics of the rental stock during this time period. The impact of the foreclosure-induced increase in demand on price is isolated from standard demand-side effects like income and unemployment. The empirical investigation makes use of the large variation in distressed home sales in the last decade and an exogenous determinant of foreclosures based on variation in state laws. A balanced panel follows 235 MSAs through the entire housing bubble time-line from 2005 to the end of the recession and beyond. Typical estimates of the increase in rental rates resulting from a 1% increase in the foreclosure rate is between 1% and 4%. Additional variation in rental rates can be explained by the level of house prices in the owner market and the age and size of the rental units.MSA-year observations are drawn from a mixture of publicly available time series and loan performance data from CoreLogic.
For further information, please contact Gloria Simpson, firstname.lastname@example.org or 949-824-5788.