Leveraged Buyouts (LBOs), Credit Reallocation, and Housing Markets

Expansionary corporate events can strengthen local housing demand, but they may also induce credit reallocation from households to firms. We study the impact of this tension on housing markets using leveraged buyouts (LBOs), which generate immediate corporate financing needs but affect home purchasing power only gradually.

Using  U.S. county-level data and a stacked difference-in-differences design, we find that LBO activity lowers the annual house price growth rate by 3-14% in three years. Local bank lending shifts toward businesses, and mortgage denial rates rise, corroborating the credit reallocation mechanism. The effects are stronger for larger buyouts, in more concentrated banking markets, and in counties with more volatile house prices. The results show that housing market responses to corporate activity depend on the balance between demand spillovers and credit-reallocation forces.