R. Ong, T. Dalton, Nicole Gurran, C. Phelps, Steven Rowley, G. Wood
This report forms part of an AHURI Inquiry into housing policies, labour force participation and economic growth. This study addresses the following research question: What are the key drivers of housing supply responsiveness, and what do the identified effects imply for policies seeking to increase housing supply responsiveness in Australia?
{"title":"Housing Supply Responsiveness in Australia: Distribution, Drivers and Institutional Settings","authors":"R. Ong, T. Dalton, Nicole Gurran, C. Phelps, Steven Rowley, G. Wood","doi":"10.18408/AHURI-8107301","DOIUrl":"https://doi.org/10.18408/AHURI-8107301","url":null,"abstract":"This report forms part of an AHURI Inquiry into housing policies, labour force participation and\u0000economic growth. This study addresses the following research question:\u0000What are the key drivers of housing supply responsiveness, and what do the identified effects\u0000imply for policies seeking to increase housing supply responsiveness in Australia?","PeriodicalId":12014,"journal":{"name":"ERN: Microeconometric Studies of Housing Markets (Topic)","volume":"92 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2017-05-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"83827906","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this report, we examine how a sample of US homeowners changed their credit card spending in response to a predictable drop in their mortgage payment driven by the Federal Reserve’s low interest rate policy that followed the Great Recession. Using a de-identified sample of Chase customers who had a hybrid adjustable-rate mortgages (ARM) and a Chase credit card, we analyze changes in credit card spending and revolving balance leading up to and after mortgage reset. We organize our results into four findings. First, forty-four percent of the homeowners in our sample experienced a large drop in their hybrid ARM payment at reset, which on average represented over 5 percent of their monthly income. Second, homeowners increased their spending by 9 percent in advance of the anticipated drop in their mortgage payments and by 15 percent after reset, despite a considerable drop in housing wealth. Third, homeowners used credit card borrowing to finance 21 percent of their pre-reset anticipatory spending increase, and post–reset they further increased their revolving balances. Over the full two year period, their total spending increase exceeded their mortgage-related savings by 4 percent. Fourth, Homeowners used the savings from lower hybrid ARM payments to make more purchases across all spending categories, notably home improvements and healthcare. Overall, we find that in a declining interest rate environment, the income channel that transmits interest rate policy to homeowners with ARMs is automatic, the consumer response is considerable, and that there are both anticipatory and contemporaneous increases in consumption. Additional research is needed to understand if the income channel also has the intended and expected contractionary effects on consumer spending as policy rates move higher. Armed with a full understanding, housing policy makers could evaluate the policies that influence which type of mortgage (fixed-rate or variable-rate) borrowers choose and should consider the effects these policies will have on the ability of monetary policy to impact personal consumption through the business cycle.
{"title":"The Consumer Spending Response to Mortgage Resets: Microdata on Monetary Policy","authors":"Kanav Bhagat, Diana Farrell, Vijay Narasiman","doi":"10.2139/SSRN.2966094","DOIUrl":"https://doi.org/10.2139/SSRN.2966094","url":null,"abstract":"In this report, we examine how a sample of US homeowners changed their credit card spending in response to a predictable drop in their mortgage payment driven by the Federal Reserve’s low interest rate policy that followed the Great Recession. Using a de-identified sample of Chase customers who had a hybrid adjustable-rate mortgages (ARM) and a Chase credit card, we analyze changes in credit card spending and revolving balance leading up to and after mortgage reset. We organize our results into four findings. First, forty-four percent of the homeowners in our sample experienced a large drop in their hybrid ARM payment at reset, which on average represented over 5 percent of their monthly income. Second, homeowners increased their spending by 9 percent in advance of the anticipated drop in their mortgage payments and by 15 percent after reset, despite a considerable drop in housing wealth. Third, homeowners used credit card borrowing to finance 21 percent of their pre-reset anticipatory spending increase, and post–reset they further increased their revolving balances. Over the full two year period, their total spending increase exceeded their mortgage-related savings by 4 percent. Fourth, Homeowners used the savings from lower hybrid ARM payments to make more purchases across all spending categories, notably home improvements and healthcare. Overall, we find that in a declining interest rate environment, the income channel that transmits interest rate policy to homeowners with ARMs is automatic, the consumer response is considerable, and that there are both anticipatory and contemporaneous increases in consumption. Additional research is needed to understand if the income channel also has the intended and expected contractionary effects on consumer spending as policy rates move higher. Armed with a full understanding, housing policy makers could evaluate the policies that influence which type of mortgage (fixed-rate or variable-rate) borrowers choose and should consider the effects these policies will have on the ability of monetary policy to impact personal consumption through the business cycle.","PeriodicalId":12014,"journal":{"name":"ERN: Microeconometric Studies of Housing Markets (Topic)","volume":"58 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2017-04-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84892257","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This research paper outlines some of the issues facing investors in mortgage servicing rights (MSRs) and/or creditors holding security interests against these intangible assets or the underlying collateral. These issues include swings in the valuation of the MSR, repayments of loans in the underlying portfolio that may cause the MSR to decay more rapidly, and most important, the possibility of an involuntary transfer of the MSR that causes the investor and/or secured creditor a total loss. The paper concludes by suggesting some of the key quantitative and qualitative indicators which investors and regulators should assess to avoid situations where involuntary servicing termination may occur.
{"title":"Assessing Involuntary Termination Risk on Residential Mortgage Servicing Rights","authors":"R. C. Whalen","doi":"10.2139/ssrn.2936422","DOIUrl":"https://doi.org/10.2139/ssrn.2936422","url":null,"abstract":"This research paper outlines some of the issues facing investors in mortgage servicing rights (MSRs) and/or creditors holding security interests against these intangible assets or the underlying collateral. These issues include swings in the valuation of the MSR, repayments of loans in the underlying portfolio that may cause the MSR to decay more rapidly, and most important, the possibility of an involuntary transfer of the MSR that causes the investor and/or secured creditor a total loss. The paper concludes by suggesting some of the key quantitative and qualitative indicators which investors and regulators should assess to avoid situations where involuntary servicing termination may occur.","PeriodicalId":12014,"journal":{"name":"ERN: Microeconometric Studies of Housing Markets (Topic)","volume":"27 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2017-03-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"83202809","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Valuation of alternative assets such as private equity and commercial real estate are appraisal based, rather than marked-to-market. Empirical studies show that appraisal based returns tend to be smoothed and exhibit strong autocorrelation, which creates a stale-pricing bias. In this paper, we have described the weaknesses of the current approaches to estimating risk factors for alternative assets. We then introduce a new method for estimating risk factor exposures which avoids these weaknesses. We also argue that misspecification of appraisal frequency may be the reason why factor sensitivities estimated from appraisal returns tend to be smaller than those estimated on underlying cash flows. Finally, we illustrate the application of the new method to popular measures of return for private equity and real estate.
{"title":"Direct Estimation of Factor Exposures from Appraisal Returns","authors":"Jen-Yen Lin","doi":"10.2139/ssrn.2935424","DOIUrl":"https://doi.org/10.2139/ssrn.2935424","url":null,"abstract":"Valuation of alternative assets such as private equity and commercial real estate are appraisal based, rather than marked-to-market. Empirical studies show that appraisal based returns tend to be smoothed and exhibit strong autocorrelation, which creates a stale-pricing bias. In this paper, we have described the weaknesses of the current approaches to estimating risk factors for alternative assets. We then introduce a new method for estimating risk factor exposures which avoids these weaknesses. We also argue that misspecification of appraisal frequency may be the reason why factor sensitivities estimated from appraisal returns tend to be smaller than those estimated on underlying cash flows. Finally, we illustrate the application of the new method to popular measures of return for private equity and real estate.","PeriodicalId":12014,"journal":{"name":"ERN: Microeconometric Studies of Housing Markets (Topic)","volume":"7 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2017-03-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80264335","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We argue that the combination of a loan with a mandatory saving period as a precondition for loan approval can be used as a mechanism to improve the creditworthiness of the pool of borrowers. This result is based on the argument that the personal creditworthiness of a borrower is strongly correlated with his ability to save on a regular basis. Using in house data of a large German CSH supplier we estimate a Cox Proportional Hazard Model to show that default rates of CSH contracts are in fact lower than those of comparable loans. This effect remains after controlling for other information on the creditworthiness of the borrower.
{"title":"Loan Performance of Contractual Savings for Housing","authors":"Hans-Peter Burghof, Marlis Schairer","doi":"10.2139/ssrn.2925104","DOIUrl":"https://doi.org/10.2139/ssrn.2925104","url":null,"abstract":"We argue that the combination of a loan with a mandatory saving period as a precondition for loan approval can be used as a mechanism to improve the creditworthiness of the pool of borrowers. This result is based on the argument that the personal creditworthiness of a borrower is strongly correlated with his ability to save on a regular basis. Using in house data of a large German CSH supplier we estimate a Cox Proportional Hazard Model to show that default rates of CSH contracts are in fact lower than those of comparable loans. This effect remains after controlling for other information on the creditworthiness of the borrower.","PeriodicalId":12014,"journal":{"name":"ERN: Microeconometric Studies of Housing Markets (Topic)","volume":"71 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2017-02-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85894315","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Indirect real estate (IRE) returns are often shown to lead direct real estate (DRE) returns. Apart from differences in liquidity, transaction costs, and management skills, the DRE market is also less complete than the IRE market — when negative shocks arrive, one can only short IRE (e.g., real estate stocks or REITs), but not DRE. This study investigates if short sales in the IRE market convey any information to the DRE market. Based on high‐frequency (weekly) property price data in Hong Kong from 2000 to 2012, we find that short sales in the IRE market led DRE returns, even after controlling for the lagged IRE returns in a VAR model. This supports an information spillover mechanism in which the DRE market learns private information that is not reflected in IRE returns. The spillover effect, however, weakened after the recent global financial crisis because the increased uncertainty over the credibility of individual firms made short sales more reflective of firm‐specific information than real estate market fundamentals.
{"title":"Short Sales and Price Discovery in the Hong Kong Real Estate Market","authors":"S. Wong, T. C. C. Lai, K. Deng","doi":"10.1111/1540-6229.12130","DOIUrl":"https://doi.org/10.1111/1540-6229.12130","url":null,"abstract":"Indirect real estate (IRE) returns are often shown to lead direct real estate (DRE) returns. Apart from differences in liquidity, transaction costs, and management skills, the DRE market is also less complete than the IRE market — when negative shocks arrive, one can only short IRE (e.g., real estate stocks or REITs), but not DRE. This study investigates if short sales in the IRE market convey any information to the DRE market. Based on high‐frequency (weekly) property price data in Hong Kong from 2000 to 2012, we find that short sales in the IRE market led DRE returns, even after controlling for the lagged IRE returns in a VAR model. This supports an information spillover mechanism in which the DRE market learns private information that is not reflected in IRE returns. The spillover effect, however, weakened after the recent global financial crisis because the increased uncertainty over the credibility of individual firms made short sales more reflective of firm‐specific information than real estate market fundamentals.","PeriodicalId":12014,"journal":{"name":"ERN: Microeconometric Studies of Housing Markets (Topic)","volume":"17 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2017-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89304587","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper proposes a nonlinear econometric specification for estimating the hedonic land value impact of dis-amenities that affect only a portion of a property’s value. This specification allows for the possibility that the price-acreage relationship is nonlinear, and assumes that the dis-amenity’s price impact is some product of overall land value. It is based on an assumed data-generating process in which sellers and buyers adjust their asking and bid prices by adjusting what they perceive to be the net property acreage – i.e., the effective usable acreage, after accounting for any use loss associated with the dis-amenity.
{"title":"Specifying the Price Impacts of Utility Easements","authors":"M. K. McGee","doi":"10.2139/ssrn.2957234","DOIUrl":"https://doi.org/10.2139/ssrn.2957234","url":null,"abstract":"This paper proposes a nonlinear econometric specification for estimating the hedonic land value impact of dis-amenities that affect only a portion of a property’s value. This specification allows for the possibility that the price-acreage relationship is nonlinear, and assumes that the dis-amenity’s price impact is some product of overall land value. It is based on an assumed data-generating process in which sellers and buyers adjust their asking and bid prices by adjusting what they perceive to be the net property acreage – i.e., the effective usable acreage, after accounting for any use loss associated with the dis-amenity.","PeriodicalId":12014,"journal":{"name":"ERN: Microeconometric Studies of Housing Markets (Topic)","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2017-01-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81309988","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study examines the expected returns compared with the actual returns on Thai property funds by using the Capital Assets Pricing Model (CAPM) during period January 2012 to January 2017. The data used from property funds listed on the Stock Exchange of Thailand (SET). Using of historical monthly closed prices from each property fund for four consecutive years to find beta and apply in CAPM to get the expected returns, and using the current year closed prices data to find the average actual returns. This study also used Thai government bond rate to determine the risk-free rate. The Property Fund for Public Offering (PFPO) market and Real Estates Investment Trusts (REITs) are similar and still young, and therefore has limited availability of historical data. The result found the positive relationship between the beta and the expected returns. The lower beta or even negative beta gives negative expected returns, higher expected returns when having a higher beta. Even though with a minimal of property fund history data, found the CAPM methodology is suitable for calculated the expected returns with Thai PFPO/REITs. If the CAPM holds true with the Thai market, then the benefit will be that with the confidence of common legal structures and processes, investors will be able to make decisions based on the accurate and timely information.
{"title":"Property Funds and REITs in Thailand: A CAPM Investigation","authors":"Kulab Jamar","doi":"10.2139/ssrn.2907400","DOIUrl":"https://doi.org/10.2139/ssrn.2907400","url":null,"abstract":"This study examines the expected returns compared with the actual returns on Thai property funds by using the Capital Assets Pricing Model (CAPM) during period January 2012 to January 2017. The data used from property funds listed on the Stock Exchange of Thailand (SET). Using of historical monthly closed prices from each property fund for four consecutive years to find beta and apply in CAPM to get the expected returns, and using the current year closed prices data to find the average actual returns. This study also used Thai government bond rate to determine the risk-free rate. The Property Fund for Public Offering (PFPO) market and Real Estates Investment Trusts (REITs) are similar and still young, and therefore has limited availability of historical data. The result found the positive relationship between the beta and the expected returns. The lower beta or even negative beta gives negative expected returns, higher expected returns when having a higher beta. Even though with a minimal of property fund history data, found the CAPM methodology is suitable for calculated the expected returns with Thai PFPO/REITs. If the CAPM holds true with the Thai market, then the benefit will be that with the confidence of common legal structures and processes, investors will be able to make decisions based on the accurate and timely information.","PeriodicalId":12014,"journal":{"name":"ERN: Microeconometric Studies of Housing Markets (Topic)","volume":"50 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2017-01-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90671602","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Despite Japan’s highly developed housing market, little is known about the determinants of renter-to-homeowner tenure transition. Exploiting the Japanese longitudinal household data of the Keio Household Panel Survey (2004–2013), this paper aims to close this gap. Our results show that income level and increase in family size are the strongest determinants for homeownership in Japan. We find that although both rural and urban households with higher incomes are more likely to transition to homeownership, access in rural areas is more equally distributed over various income groups. Since most of the previous empirical studies on tenure choice pay little attention to wealth as a measure of purchasing power, possibly due to data limitation, we draw attention to it and its relative levels. We find that household wealth levels matter, particularly in urban areas, whereas in rural areas homeownership is more equally distributed. Nonetheless, given the relatively low levels of household wealth among renters, our results suggest that income is a more important determinant of successful tenure transition.
{"title":"Determinants of Tenure Choice in Japan: What Makes You a Homeowner?","authors":"T. Aizawa, Matthias Helble","doi":"10.2139/ssrn.2893407","DOIUrl":"https://doi.org/10.2139/ssrn.2893407","url":null,"abstract":"Despite Japan’s highly developed housing market, little is known about the determinants of renter-to-homeowner tenure transition. Exploiting the Japanese longitudinal household data of the Keio Household Panel Survey (2004–2013), this paper aims to close this gap. Our results show that income level and increase in family size are the strongest determinants for homeownership in Japan. We find that although both rural and urban households with higher incomes are more likely to transition to homeownership, access in rural areas is more equally distributed over various income groups. Since most of the previous empirical studies on tenure choice pay little attention to wealth as a measure of purchasing power, possibly due to data limitation, we draw attention to it and its relative levels. We find that household wealth levels matter, particularly in urban areas, whereas in rural areas homeownership is more equally distributed. Nonetheless, given the relatively low levels of household wealth among renters, our results suggest that income is a more important determinant of successful tenure transition.","PeriodicalId":12014,"journal":{"name":"ERN: Microeconometric Studies of Housing Markets (Topic)","volume":"30 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2016-12-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90948281","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2016-11-01DOI: 10.5089/9781475552799.001.A001
T. Poghosyan
We use a novel dataset on effective property tax rates in U.S. states and metropolitan statistical areas (MSAs) over the 2005–2014 period to analyze the relationship between property tax rates and house price volatility. We find that property tax rates have a negative impact on house price volatility. The impact is causal, with increases in property tax rates leading to a reduction in house price volatility. The results are robust to different measures of house price volatility, estimation methodologies, and additional controls for housing demand and supply. The outcomes of the analysis have important policy implications and suggest that property taxation could be used as an important tool to dampen house price volatility.
{"title":"Can Property Taxes Reduce House Price Volatility? Evidence from U.S. Regions","authors":"T. Poghosyan","doi":"10.5089/9781475552799.001.A001","DOIUrl":"https://doi.org/10.5089/9781475552799.001.A001","url":null,"abstract":"We use a novel dataset on effective property tax rates in U.S. states and metropolitan statistical areas (MSAs) over the 2005–2014 period to analyze the relationship between property tax rates and house price volatility. We find that property tax rates have a negative impact on house price volatility. The impact is causal, with increases in property tax rates leading to a reduction in house price volatility. The results are robust to different measures of house price volatility, estimation methodologies, and additional controls for housing demand and supply. The outcomes of the analysis have important policy implications and suggest that property taxation could be used as an important tool to dampen house price volatility.","PeriodicalId":12014,"journal":{"name":"ERN: Microeconometric Studies of Housing Markets (Topic)","volume":"33 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2016-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85233113","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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