Speculating on home improvements

• 成果类型: Article
• 署名作者: Choi, Hyun-Soo; Hong, Harrison; Scheinkman, Jose
• 署名单位: Singapore Management University; Princeton University; Columbia University; National Bureau of Economic Research
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2013.11.011
• 发表日期: 2014
• 页码: 609-624
• 关键词: Speculation; Home improvements; Real estate; Remodeling

摘要

We develop a speculation-based theory of home improvements. Housing services are produced from a mix of land and structures. Homeowners optimistic about future prices for these services speculate by making improvements, which we model as them increasing their structures holding fixed their land. The recoup value (the difference between the resale value of improvements and construction costs) is simultaneously increasing in home price appreciation and falls with construction cost growth. This prediction stands in contrast to a consumption-cum-financial constraints motive in which rising home prices loosen financial constraints and lead to lower recoup values. We provide evidence consistent with a speculative motive using data on the costs and recoup values of remodeling projects across US cities. (C) 2013 Elsevier B.V. All rights reserved.