Tuesday, May 27, 2014

In Real Estate, Locals Know Best

Who is the better house flipper—locals or out-of-town investors? The locals are, according to a National Bureau of Economic Research study (NBER Working Paper 19817, $5). In a large-scale study of single-family home purchases in 21 cities from 2000 through 2007, NBER researchers discovered that local buyers of second homes made a bigger profit on their investment—in part because they picked a better time to sell.

Among second home buyers in Las Vegas, for example, out-of-towners who purchased a house in March 2004 and sold during the study time period made an 8 percent per year capital gain on the property. The locals made a much larger 17 percent per year capital gain. "Out-of-town second home buyers were notably less successful than local buyers in timing their exit from the market," the researchers conclude.

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