Record number :
Title of article :
Speculating on home improvements
Author/Authors :
Choi، نويسنده , , Hyun-Soo and Hong، نويسنده , , Harrison and Scheinkman، نويسنده , , Jose، نويسنده ,
Issue Information :
روزنامه با شماره پیاپی سال 2014
Pages :
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Abstract :
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.
Keywords :
Speculation , Real estate , Home improvements , Remodeling
Journal title :
Journal of Financial Economics
Journal title :
Journal of Financial Economics
Serial Year :
Link To Document :