Real Estate Markets

A Renter or Homeowner Nation?
(with Arthur Acolin and Laurie S. Goodman)
Cityscape, Vol. 18, No. 2, Winter 2016, 145-158.

Credit Supply and Housing Prices in National and Local Markets
Public Finance Review, Vol. 44 Issue 1, December 2015, 6-21.

Housing America: The Unequal Geography of Risk and Opportunity
Housing Policy Debate, Volume 25, Issue 4, July 2015, 813-816.

Macroeconomic Risk Factors and the Role of Mispriced Credit in the Returns from International Real Estate Securities (with Andrey D. Pavlov and Eva M. Steiner)
Real Estate Economics, Vol. 43, Issue 1, Spring 2015, 241-270.

Real Estate Prices in Beijing 1644 to 1840 (with Dan Raff and Se Yan)   Abstract  
Explorations in Economic History, Vol. 50, No. 3, July 2013, 368-386

This paper provides the first estimates of housing price movements for Beijing in late pre-modern China. We hand-collect from archival sources transaction prices and other house attribute information from the 498 surviving house sale contracts for Beijing during the first two centuries of the Qing Dynasty(1644-1840),along period without major wars, political turmoil, or significant institutional change in the Chinese capital. We use hedonic methods to construct areales state price index for Beijing for the period. The regression analysis explains a major proportion of the variance of housing prices. We find that house prices grew steadily for the first half-century of the Qing Dynasty and declined afterwards in both nominal and real terms through the late eighteenth century. Nominal prices grew starting in the late eighteenth century and declined from the early nineteenth century through 1840. But these price change so curred with contemporaneous price changes in basic measures of the cost of living: the re was little change in real terms to the end of our period.

Subprime Lending and Real Estate Prices (with Andrey Pavlov)   Abstract  
Real Estate Economics, Vol. 38, No. 1, Spring 2011, p.1-17

This article establishes a theoretical and empirical link between the use of aggressive mortgage lending instruments, such as interest-only, negative-amortization or subprime mortgages, and the underlying house prices. Such instruments, which come into existence through innovation or financial deregulation, allow more borrowing than otherwise would occur in previously affordability-constrained markets. Within the context of a model with an endogenous rent-buy decision, we demonstrate that the supply of aggressive lending instruments temporarily increases the asset prices in the underlying market because agents find it more attractive to own or because their borrowing constraint is relaxed, or both. This result implies that the availability of aggressive mortgage lending instruments magnifies the real estate cycle and the effects of fundamental demand shocks. We empirically confirm the predictions of the model using recent subprime origination experience. In particular, we find that regions that receive a high concentration of aggressive lending instruments experience larger price increases and subsequent declines than areas with low concentration of such instruments. This result holds in the presence of various controls and instrumental variables.

Immigration and the Neighborhood (with Albert Saiz)   Abstract  
American Economic Journal: Economic Policy, Vol.3, No.2m May 2011m p. 169-188

What impact does immigration have on neighborhood dynamics? Within metropolitan areas, we find that housing values have grown relatively more slowly in neighborhoods of immigrant settlement. We propose three nonexclusive explanations: changes in housing quality, reverse causality, or the hypothesis that natives find immigrant neighbors relatively less attractive (native flight). To instrument for the actual number of new immigrants, we deploy a geographic diffusion model that predicts the number of new immigrants in a neighborhood using lagged densities of the foreign-born in surrounding neighborhoods. Subject to the validity of our instruments, the evidence is consistent with a causal interpretation of an impact from growing immigration density to native flight and relatively slower housing price appreciation. Further evidence indicates that these results may be driven more by the demand for residential segregation based on race and education than by foreignness per se.

What is a Tree Worth? Green City Strategies and Housing Prices (with Grace Wong)   Abstract  
Real Estate Economics, Vol.36, No.2, Summer, 2008, 213-239

We investigate the correlation between curb-side tree plantings and housing price movements in Philadelphia from 1998 to 2003, comparing two programs, one by the Philadelphia Horticultural Society that requires block-group effort that focuses on lowincome neighbourhoods and the other by the Fairmount Park Commission that is individual-based without specific target areas. A 7 to 11 percent price differential is identified within 4000ft of the Fairmount tree plantings. We argue that this is largely driven by either social capital creation or a signaling mechanism, on the top of an intrinsic tree value (around 2 percent). Findings using the PHS tree program suggest that development of social capital or environmentally-conscious behavior might be a less important channel. Any positive changes brought by the PHS tree plantings were not detected with sufficient statistical power.

The Role of Speculation in Real Estate Cycles (with Stephen Malpezzi)
Journal of Real Estate Literature, Vol. 13, No.2, 2005

REIT Economies of Scale: Fact or Fiction? (with Brent W. Ambrose, Steven R. Ehrlich, William T. Hughes)   Abstract  
Journal of Real Estate Finance and Economics, Vol. 20, Issue 2, 2000

The real estate industry has recently witnessed significant and pervasive consolidation with further growth and consolidation generally viewed as a foregone conclusion. For example, between 1990 and 1997, growth in average net real estate investments by large REITs outpaced growth in average net real estate investments by small REITs by 13 percent. However, no systematic study of the benefits of this consolidation exists. This research studies whether or not there are gains to consolidation due to economies of scale from size, brand imaging, and informational gains from geographic specialization. Our sample consists of 41 multifamily equity REITs, for whom finanical and property level data are available in the SNL REIT Database. Using this data, we construct ‘shadow’ portfolios that mimic each REIT’s exposure to changes in local market conditions. Our results show no size economies, that branding in real estate is allusive, and that geographic specialization, in agreement with Gyourko and Nelling (1993), has no significant benefit.

An Economic Analysis of Housing Abandonment (with Benjamin P. Scafidi, Michael H Schill and Dennis P. Culhane)   Abstract  
Journal of Housing Economics, Vol 7, Issue 4, 1998, 287-303

Landlord abandonment of rental housing has affected many American cities since the 1960’s. Because of data limitations, there have been few empirical analyses of the determinants of housing abandonment. In this paper, we use a rich database that contains information on individual residential properties in New York City to estimate a reduced form model of owner abandonment. We model an owner’s decision to abandon his or her property as being similar to an investor’s decision to exercise a put option on a financial instrument. When required to pay delinquent taxes, a wealth-maximizing landlord has an incentive to cede ownership of his or her residential property when the value of all outstanding liens exceeds the property’s market value. Estimates from the model are used to examine whether empirical evidence supports this option model of abandonment.

Information Externalities and Home Mortgage Underwriting (with David C. Ling)
Journal of Urban Economics, Vol 44. 1998

Do Cities and Suburbs Cluster? (with William W. Goeztmann and Matthew Spiegel)   Abstract  
Cityscape: A Journal of Policy Development and Research, Vol. 3, No.3, 1998, 193-204

This article addresses the issue of how closely the fortunes of suburbs are tied to the fortunes of the central city. We develop housing price indices for most of the zip codes in California and use them in a clustering procedure to determine whether city and suburban housing markets naturally aggregate or move separately. We find that central cities tend to group with their suburbs, suggesting that the housing markets of cities and suburbs are closely linked.

Frequency of Transaction and House Price Modeling (with Henry O. Pollakowski and Bradford Case)   Abstract  
Journal of Real Estate Finance and Economics Vol. 14.1/2, 1997, 173-188

This article examines the characteristics and price behavior of repeatedly transacted properties. Using data from four U.S. counties, we estimate hedonic price models of properties grouped by transaction frequency, and compare estimated standard deviations and estimated appreciation rates by group. For each of four counties studied, we find that estimated house price appreciation is systematically higher among properties that transact more frequently. One possible explanation for this result is that purchasers make property improvements that are not adequately reflected in the available data We also find that estimated standard deviations of the disturbance term show a marked decrease as the frequency of transaction increases. Since frequently transacting properties are not found to be systematically more homogeneous than seldomly transacting properties, we do not attribute this to any increase in homogeneity for frequently transacting properties, but rather to the length of time elapsed between transactions of properties. The findings of this article suggest that repeat-sales price models may need to be adjusted to account for cross-sectional variation in transaction probabilities—that is, the selectivity of the subsample of properties that transacted (or transacted repeatedly) during any finite study period.

Where the Homeless Come From: A Study of the Prior Address Distribution of Families Admitted to Public Shelters in New York City and Philadelphia (with Dennis P. Culhane and Chang-Moo Lee)   Abstract  
Housing Policy Debate, Vol. 7.2, 1996, 327-365

This study investigates hypotheses regarding the association of census tract variables with the risk for homelessness. We used prior address information reported by families entering emergency shelters in two large U.S. cities to characterize the nature ofthat distribution. Three dense clusters of homeless origins were found in Philadelphia and three in New York City, accounting for 67 percent and 61 percent of shelter admissions and revealing that homeless families’ prior addresses are more highly concentrated than the poverty distribution in both cities. The rate of shelter admission is strongly and positively related to the concentration of poor, African‐American, and female‐headed households with young children in a neighborhood. It is also correlated with fewer youth, elderly, and immigrants. Such areas have higher rates of unemployment and labor force nonpartici‐pation, more housing crowding, more abandonment, higher rates of vacancy, and higher rent‐to‐income ratios than other areas.

Clustering Methods for Real Estate Portfolios (with William N. Goetzmann)   Abstract  
Real Estate Economics, Vol. 23.3, 1995, 271-310

A clustering algorithm is applied to effective rents for twenty-one U.S. office markets, and to twenty-two metropolitan markets using vacancy data. It provides support for the conjecture that there exists a few major families of cities: including an oil and gas group and an industrial Northeast group. Unlike other clustering studies, we find strong evidence of bicoastal city associations among cities such as Boston and Los Angeles. We present a bootstrapping methodology for investigating the robustness of the clustering algorithm, and develop a means for testing the significance of city associations. While the analysis is limited to aggregate rent and vacancy data, the results provide a guideline for the further application of cluster analysis to other types of real estate and economic information.

Did Office Market Size Matter in the 1980s? (with Henry O. Pollakowski, Lloyd Lynford)   Abstract  
Real Estate Economics, Vol 20, Issue 2, June 1992, 302-324

Recent contributions to the literature have resulted in a standard modelling of office markets. The models provide considerable insight into the working of office markets. Nonetheless, a major difficulty is the use of data for a single city or aggregate data for the U.S. The latter implicitly assumes that model structure is invariant across cities. In this article we test for structural differences in office markets by size class. Rental data from REIS Reports for twenty-one metropolitan areas for the time period 1981 to 1990 are used to model office market behavior. Results suggest market outcomes vary by city size, larger markets are better modelled using standard procedures, and Manhattan behaves quite differently from the other markets.

Interjurisdictional Price Effects of Land Use Controls (with Man Cho)
Journal of Urban and Contemporary Law, Vol. 40, Summer/Fall 1991, 49-64

The Effects of Land Use Constraints on Housing Prices (with Henry O. Pollakowski)   Abstract  
Land Economics. Vol 66.3, August 1990, 315-324

This paper estimates the direct and spillover effects of zoning controls along with other growth restrictions on housing prices. Theory leads us to expect a positive effect of land-use restrictions on the price of developed land and a negative effect on the price of undeveloped land. We consider the effects on housing prices, and hence the effects on developed land. Other studies have examined the impact of separate components of land-use controls within a locality. We show that specific growth controls must be examined in the overall context of local land-use policy, and that interjurisdictional as well as intrajurisdictionael effects must be considered.