Investors in the housing market

In this paper, we analyze the sizable and systematic differences in annualized capital gains across investor groups in the US housing market. Using data on more than 21 million repeat sales, we investigate the performance of highly heterogeneous buyers: owner-occupiers, private, short-term, and long-term investors. Our results link the differences in capital gains to heterogeneous risk-taking. Investor-specific exposure to lagged local return risk explains a sizable and persistent share of investors' high capital gains. In contrast, neither location choice nor temporal factors on the local or aggregate level, respectively, can help explain investors' outperformance.