How Much Did Pandemic Uncertainty Affect Real-Estate Speculation? Evidence from On-Market Valuation of For-Sale Versus Rental Properties

We exploit a panel of Zillow Inc. property valuations to estimate the excess real-estate price growth observed in three California cities that is attributable to speculation triggered by the COVID-19 pandemic. Our research design leverages the counterfactual comparison of properties listed for sale to properties listed for rent, with the latter property class being available for habitation - just not for purchase - and thus neutral to price speculation. We implement a pre/post-2020 difference-in-difference estimation, which utilizes unit-level matching of otherwise similar sale and rental properties within a 1/2-mile radius of each other to compare differences in (a) 1-month valuation changes and (b) spot valuation uncertainties. Results indicate post-2020 property valuations in Merced and San Jose featured an excess annual price estimate growth of 22% and 14.8% points, respectively, whereas the Fresno market does not feature statistically significant excess growth.