Price and Liquidity Dynamics for Single and Multi-Family Homes during Housing Market Shocks

Real estate research has primarily focused on examining aggregate shocks and dynamics to describe housing market trends; however, heterogeneity across housing types has been largely ignored especially on an intra-city level. In this paper, we address this heterogeneity through exploring how two different market types – single-family homes (SFH) and multi-family homes (MFH) within in a single metropolitan area – responded to the housing market bust and recovery between 2008 and 2016. Results from a robust series of specifications provide evidence that market dynamics of price, liquidity, and degree of overpricing deviated substantially both during the housing market bust and recovery period, and showed significant variation across housing types. These outcomes are novel in demonstrating that SFH and MFH are differentially affected by market shocks, and that a time-constant control for housing type may not accurately capture housing market dynamics in any single locale, potentially leading to erroneous conclusions about policy implementation.