Desperate House Sellers: Distress Among Developers
Abstract: Using granular data on home builder housing developments from the 2006-09 housing crisis, I show that builders spread house price shocks across geographically distinct projects via their internal capital markets. Builders who experience losses in one area subsequently sell homes in unaffected areas at a discount to raise cash quickly. Financially constrained firms are more likely to cut prices of homes in healthy areas in response to losses in unhealthy ones. Firms also smooth shocks across projects only during the crisis and not during the boom. These results together suggest firm internal capital markets spread negative economic shocks across space.
File(s): File format is application/pdf https://www.federalreserve.gov/econres/feds/files/2021065pap.pdf
Part of Series: Finance and Economics Discussion Series
Publication Date: 2021-10-13