Residential Real Estate 2
Paper Session
Sunday, Jan. 5, 2025 10:15 AM - 12:15 PM (PST)
- Chair: Sonia Gilbukh, CUNY-Baruch College
Realtor Referrals to Loan Officers: Efficiency or Exploitation?
Abstract
This paper provides to our knowledge the first evidence of realtors' and mortgage loan officers' referral network. Using a unique dataset that traces the entire realtor-mortgage loan officer network in 17 states, we document significant concentration in these networks, with realtors frequently collaborating with a limited number of loan officers. Our analysis shows that homebuyers working with referred loan officers pay higher mortgage rates, with an instrumental variable (IV) approach estimating a premium of 16.5 basis points (or $2,310 in upfront costs). This premium is primarily driven by suboptimal lender selection. The financial burden disproportionately affects vulnerable groups, including Black and Hispanic borrowers, and those with low down payments or high debt-to-income ratios. While referral networks slightly expedite closing times, these benefits are outweighed by the significant financial costs and equity concerns they raise. Our findings highlight the need for greater transparency in referral practices to ensure fairness and efficiency in the mortgage market.Adaptive Rent Pricing and Its Consequences
Abstract
Informed landlords adjust rent more flexibly to expand their market share, fueling rent inflation. They secure a 0.5% higher annual rental income through an additional 0.3% rent adjustment, regardless of whether the market is in a downturn or recovery. In volatile periods, this advantage grows further: they achieve a 1.7% higher annual income through an additional 0.8% rent adjustment. Although frictions in rent adjustments contribute to these outcomes, they do not fully explain the pricing patterns observed among informed land-lords—pricing expertise is key. These findings suggest that informed institutional landlords lead the rental market through flexible pricing strategies, and market volatility disproportionately challenges uninformedmom-and-pop landlords, who make up the majority of the rental market.
Land Use Regulation, Homeownership, and Wealth Inequality
Abstract
We examine the role that housing market regulatory restrictiveness plays in differentially affecting the net wealth of owners and renters over time, and its contribution to wealth inequality. In tightly regulated, desirable locations, house prices and rents rise strongly in response to demand shocks. Because credit constraints prevent many households from becoming homeowners, this can lead to growing differences in wealth accumulation between homeowners and renters and, consequently, rising wealth inequality. We find that homeowners living in regulatory-restrictive locations experienced the greatest twenty-year house price growth and sizable increases in net wealth compared to renters or homeowners living in less regulated locations. Accounting for sorting, a household with average characteristics that owns instead of rents in a tightly regulated location accumulates 56% more in net wealth between 1999 and 2019, consistent with an observed increase in the Gini-coefficient of wealth inequality of 13%. In less regulated metro areas, we do not find differences in wealth accumulation by homeownership status nor rising wealth inequality. Additional specifications examine transition and timing effects, homeowners’ wealth accumulation across regulatory status, issues of endogeneity, correlations between local house price growth, a rising college premium and local variation in stock investment behaviour and homeowner cash-out/reinvest behaviour.Discussant(s)
Franco Zecchetto
,
Mexico Autonomous Institute of Technology
Luis Lopez
,
University of Illinois-Chicago
Boaz Abramson
,
Columbia University
Betty Wang
,
Hong Kong University
JEL Classifications
- R0 - General