We model a home seller's pricing decision under a generally defined prospect value function. We show a simple disposition effect is caused by reference dependence, but it only exists when the agent is risk neutral. Diminishing sensitivity will lead to a two-way disposition effect by generating a local reverse disposition effect, a range in which the seller's asking price decreases with increasing potential loss. Loss aversion tends to magnify the disposition effect and hence mitigates the reverse disposition effect. One direct implication is that acclaimed tests on loss aversion such as Genesove and Mayer [2001] and Pope and Schweitzer [2011] are likely invalid. We present evidence consistent with the model by using multiple listing service data from Virginia. Our findings suggest that studies which predominantly focus on a one-way disposition effect can be overly simplistic and misleading as it depends on the strong assumption of risk neutrality.
{"title":"Prospect Theory and a Two-way Disposition Effect: Theory and Evidence from the Housing Market","authors":"Z. Li, Michael J. Seiler, Hua Sun","doi":"10.2139/ssrn.2939186","DOIUrl":"https://doi.org/10.2139/ssrn.2939186","url":null,"abstract":"We model a home seller's pricing decision under a generally defined prospect value function. We show a simple disposition effect is caused by reference dependence, but it only exists when the agent is risk neutral. Diminishing sensitivity will lead to a two-way disposition effect by generating a local reverse disposition effect, a range in which the seller's asking price decreases with increasing potential loss. Loss aversion tends to magnify the disposition effect and hence mitigates the reverse disposition effect. One direct implication is that acclaimed tests on loss aversion such as Genesove and Mayer [2001] and Pope and Schweitzer [2011] are likely invalid. We present evidence consistent with the model by using multiple listing service data from Virginia. Our findings suggest that studies which predominantly focus on a one-way disposition effect can be overly simplistic and misleading as it depends on the strong assumption of risk neutrality.","PeriodicalId":21047,"journal":{"name":"Real Estate eJournal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2019-12-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"91051724","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}
There is a growing concern over the issue of housing deficit and quality of housing stock in Lagos. Stakeholders have had reason to develop different housing strategies to curb the housing deficit issue. This study presents an attempt to assess the challenges facing the adoption and practice of rental housing as a way of curbing the housing deficit challenge. The study adopted a survey approach by administering questionnaires to Estate firms situated in Lagos. The study found that cost of financing is the factor that presents the greatest challenge to the practice of producing houses for rent. Other factors that also present huge challenges are affordability, low yield, legal system, rent, void and tenant behaviour.
{"title":"Assessment of the Challenges Facing Rental Housing in Lagos, Nigeria","authors":"Kamorudeen Lawal","doi":"10.2139/ssrn.3500132","DOIUrl":"https://doi.org/10.2139/ssrn.3500132","url":null,"abstract":"There is a growing concern over the issue of housing deficit and quality of housing stock in Lagos. Stakeholders have had reason to develop different housing strategies to curb the housing deficit issue. This study presents an attempt to assess the challenges facing the adoption and practice of rental housing as a way of curbing the housing deficit challenge. The study adopted a survey approach by administering questionnaires to Estate firms situated in Lagos. The study found that cost of financing is the factor that presents the greatest challenge to the practice of producing houses for rent. Other factors that also present huge challenges are affordability, low yield, legal system, rent, void and tenant behaviour.","PeriodicalId":21047,"journal":{"name":"Real Estate eJournal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2019-12-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82719321","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}
Joseph Gyourko, Jonathan S. Hartley, Jacob Krimmel
Abstract We report results from a new survey of local residential land use regulatory regimes for nearly 2,500 primarily suburban communities across the United States. Key stylized facts are documented and compared to findings from a previous survey (Gyourko, Saiz, Summers, 2008). We are able to observe how the local regulatory environment has changed in over 800 communities in both samples. This represents the first consistent nationwide data documenting changes in residential land use regulation at the local jurisdictional level. Finally, we discuss how these changes can and should broaden the research questions for housing and urban economists investigating the local residential land use environment.
{"title":"The Local Residential Land Use Regulatory Environment Across U.S. Housing Markets: Evidence from a New Wharton Index","authors":"Joseph Gyourko, Jonathan S. Hartley, Jacob Krimmel","doi":"10.3386/w26573","DOIUrl":"https://doi.org/10.3386/w26573","url":null,"abstract":"Abstract We report results from a new survey of local residential land use regulatory regimes for nearly 2,500 primarily suburban communities across the United States. Key stylized facts are documented and compared to findings from a previous survey (Gyourko, Saiz, Summers, 2008). We are able to observe how the local regulatory environment has changed in over 800 communities in both samples. This represents the first consistent nationwide data documenting changes in residential land use regulation at the local jurisdictional level. Finally, we discuss how these changes can and should broaden the research questions for housing and urban economists investigating the local residential land use environment.","PeriodicalId":21047,"journal":{"name":"Real Estate eJournal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2019-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86420318","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}
Over 6 million households experienced foreclosure during the financial crisis. Where did they move, how did they fare and why? First, we create a new longitudinal dataset between 2006 and 2011 from households’ date of foreclosure to their relocation. Despite significant heterogeneity in mobility outcomes, we find that individuals move to, on average, higher quality locations. However, these locations are sometimes worse than what a household would have chosen at random, on average, within the same state. Second, to investigate the source behind these plausibly suboptimal moves, we quantify the contributions of three different hypotheses—(i) local labor market conditions, (ii) local composition effects and (iii) state foreclosure institutions—toward mobility outcomes. Third, we find that individuals who move counties relocate to areas with 2.3% higher income, relative to those moving across census tracts in the same county. In sum, while our results suggest that the average foreclosed household ‘moved toward opportunity’, labor market frictions can play an important role in mediating the reallocation of labor over a business cycle.
{"title":"Moving to Opportunity? The Geography of the Foreclosure Crisis and the Importance of Location","authors":"C. Makridis, M. Ohlrogge","doi":"10.2139/ssrn.3162905","DOIUrl":"https://doi.org/10.2139/ssrn.3162905","url":null,"abstract":"\u0000 Over 6 million households experienced foreclosure during the financial crisis. Where did they move, how did they fare and why? First, we create a new longitudinal dataset between 2006 and 2011 from households’ date of foreclosure to their relocation. Despite significant heterogeneity in mobility outcomes, we find that individuals move to, on average, higher quality locations. However, these locations are sometimes worse than what a household would have chosen at random, on average, within the same state. Second, to investigate the source behind these plausibly suboptimal moves, we quantify the contributions of three different hypotheses—(i) local labor market conditions, (ii) local composition effects and (iii) state foreclosure institutions—toward mobility outcomes. Third, we find that individuals who move counties relocate to areas with 2.3% higher income, relative to those moving across census tracts in the same county. In sum, while our results suggest that the average foreclosed household ‘moved toward opportunity’, labor market frictions can play an important role in mediating the reallocation of labor over a business cycle.","PeriodicalId":21047,"journal":{"name":"Real Estate eJournal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2019-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"76164499","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}
Zhilan Feng, McKay Price, D. Ph., Webster A. Collins, Murray H. Goodman
Whether geographic diversification within property portfolios is ideal remains an open question, with most studies finding either a diversification discount or no evidence of benefits. Using a sample of equity real estate investment trusts (REITs) from 2010–2016, we find a nonlinear relation between geographic diversification and firm value. Specifically, geographic diversification is associated with higher REIT values for firms that can be described as being more transparent (i.e., they have high levels of institutional ownership or invest in core property types.) Whereas, geographic concentration is associated with higher REIT values for firms that can be described as being less transparent (i.e., they have low levels of institutional ownership or invest in non-core property types.) Operating efficiency, at both the property- and firm-levels, are the means by which the diversification value is realized. Operations improve as property portfolios become more geographically diversified for more transparent firms. When the improvements are decomposed into revenue generation and expense efficiency portions, we find revenue generation to be the main operational channel through which the benefits are obtained.
{"title":"Geographic Diversification in Real Estate Investment Trusts","authors":"Zhilan Feng, McKay Price, D. Ph., Webster A. Collins, Murray H. Goodman","doi":"10.1111/1540-6229.12308","DOIUrl":"https://doi.org/10.1111/1540-6229.12308","url":null,"abstract":"Whether geographic diversification within property portfolios is ideal remains an open question, with most studies finding either a diversification discount or no evidence of benefits. Using a sample of equity real estate investment trusts (REITs) from 2010–2016, we find a nonlinear relation between geographic diversification and firm value. Specifically, geographic diversification is associated with higher REIT values for firms that can be described as being more transparent (i.e., they have high levels of institutional ownership or invest in core property types.) Whereas, geographic concentration is associated with higher REIT values for firms that can be described as being less transparent (i.e., they have low levels of institutional ownership or invest in non-core property types.) Operating efficiency, at both the property- and firm-levels, are the means by which the diversification value is realized. Operations improve as property portfolios become more geographically diversified for more transparent firms. When the improvements are decomposed into revenue generation and expense efficiency portions, we find revenue generation to be the main operational channel through which the benefits are obtained.","PeriodicalId":21047,"journal":{"name":"Real Estate eJournal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2019-11-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"83756788","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}
Filippo Boeri, Marco Di Cataldo, Elisabetta Pietrostefani
In an effort to tackle criminal groups, the Italian State allows the confiscation of properties belonging to individuals convicted for mafia-related crimes and their reallocation to a new use. This policy is considered both as an anti-mafia measure and as a way to partially compensate the society for the harm made by the criminal organisations. Whether and how this measure has had an impact on the local areas where it is implemented, however, has not yet been investigated. We test the hypothesis that the policy contributes to the regeneration of urban spaces by assessing its impact on the value of buildings in the vicinity of confiscated/re-allocated properties. To this aim, we perform difference-in-differences analyses, both at the level of local housing markets and at the level of individual buildings, investigating the externalities of the policy across the whole Italian territory. The results unveil a positive and significant effect of re-allocations of confiscated real estate assets on house prices, declining with distance from the re-allocation site. The impact is larger in cities with stronger mafia presence and in more deprived neighbourhoods. This suggests that the policy contributes to add value to the territory where it is applied and favours processes of urban revitalisation. These findings have important implications for the development of deprived urban areas characterised by a strong presence of criminal organisations.
{"title":"Out of the Darkness: Re-Allocation of Confiscated Real Estate Mafia Assets","authors":"Filippo Boeri, Marco Di Cataldo, Elisabetta Pietrostefani","doi":"10.2139/ssrn.3488626","DOIUrl":"https://doi.org/10.2139/ssrn.3488626","url":null,"abstract":"In an effort to tackle criminal groups, the Italian State allows the confiscation of properties belonging to individuals convicted for mafia-related crimes and their reallocation to a new use. This policy is considered both as an anti-mafia measure and as a way to partially compensate the society for the harm made by the criminal organisations. Whether and how this measure has had an impact on the local areas where it is implemented, however, has not yet been investigated. We test the hypothesis that the policy contributes to the regeneration of urban spaces by assessing its impact on the value of buildings in the vicinity of confiscated/re-allocated properties. To this aim, we perform difference-in-differences analyses, both at the level of local housing markets and at the level of individual buildings, investigating the externalities of the policy across the whole Italian territory. The results unveil a positive and significant effect of re-allocations of confiscated real estate assets on house prices, declining with distance from the re-allocation site. The impact is larger in cities with stronger mafia presence and in more deprived neighbourhoods. This suggests that the policy contributes to add value to the territory where it is applied and favours processes of urban revitalisation. These findings have important implications for the development of deprived urban areas characterised by a strong presence of criminal organisations.","PeriodicalId":21047,"journal":{"name":"Real Estate eJournal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2019-11-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80230025","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}
Prior research has identified various determinants of Equity REIT sector dynamics and investment performance. This paper focuses on Mortgage REITs (MREITs) instead. MREITs are subject to the same statutory requirements as equity REITs, but invest in mortgages and MBS, and thus resemble non-depository financial institutions more than they do listed real estate investment companies. Drawing on recent theoretical advances in the financial intermediation literature, I test the hypothesis that growth and performance of MREITs are driven by variation in the capacity of chartered banks to hold credit-risky assets, which is proxied by the bank capital ratio. Using a cross-sectional comparison across the three main categories of MREITs, I show that institution-level expansion and contraction in the MREIT sector are significantly related to variation in the bank capital ratio. These sector dynamics coincide with variation in MREIT performance; notably, dividend yields and equity market valuations. I further document how MREITs adjust asset-type holdings and financing choices in response to variation in the bank capital ratio. The results constitute novel evidence on the association between the capitalization of chartered banks and growth, performance, as well as risk-taking in non-depository financial institutions.
{"title":"Mortgage REIT Sector Dynamics and Performance","authors":"Eva Steiner","doi":"10.2139/ssrn.3485172","DOIUrl":"https://doi.org/10.2139/ssrn.3485172","url":null,"abstract":"Prior research has identified various determinants of Equity REIT sector dynamics and investment performance. This paper focuses on Mortgage REITs (MREITs) instead. MREITs are subject to the same statutory requirements as equity REITs, but invest in mortgages and MBS, and thus resemble non-depository financial institutions more than they do listed real estate investment companies. Drawing on recent theoretical advances in the financial intermediation literature, I test the hypothesis that growth and performance of MREITs are driven by variation in the capacity of chartered banks to hold credit-risky assets, which is proxied by the bank capital ratio. Using a cross-sectional comparison across the three main categories of MREITs, I show that institution-level expansion and contraction in the MREIT sector are significantly related to variation in the bank capital ratio. These sector dynamics coincide with variation in MREIT performance; notably, dividend yields and equity market valuations. I further document how MREITs adjust asset-type holdings and financing choices in response to variation in the bank capital ratio. The results constitute novel evidence on the association between the capitalization of chartered banks and growth, performance, as well as risk-taking in non-depository financial institutions.","PeriodicalId":21047,"journal":{"name":"Real Estate eJournal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2019-11-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"76653097","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 provide a new theory of demand-driven business cycles based on learning from prices in an otherwise frictionless real model. In our model, house price increases caused by aggregate disturbances may be misinterpreted as a signal of improved local consumption prospects, leading households to demand more current consumption and housing. Higher demand reinforces the initial price increase in an amplification loop that drives comovement in output, labor, residential investment, and house prices even in response to aggregate supply shocks. The model's qualitative implications are consistent with observed business cycles, and it can explain apparently autonomous changes in sentiment without resorting to non-fundamental shocks.
{"title":"Learning from House Prices: Amplification and Business Fluctuations","authors":"R. Chahrour, Gaetano Gaballo","doi":"10.1093/RESTUD/RDAA079","DOIUrl":"https://doi.org/10.1093/RESTUD/RDAA079","url":null,"abstract":"We provide a new theory of demand-driven business cycles based on learning from prices in an otherwise frictionless real model. In our model, house price increases caused by aggregate disturbances may be misinterpreted as a signal of improved local consumption prospects, leading households to demand more current consumption and housing. Higher demand reinforces the initial price increase in an amplification loop that drives comovement in output, labor, residential investment, and house prices even in response to aggregate supply shocks. The model's qualitative implications are consistent with observed business cycles, and it can explain apparently autonomous changes in sentiment without resorting to non-fundamental shocks.","PeriodicalId":21047,"journal":{"name":"Real Estate eJournal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2019-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"75898140","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}
The ‘China shock’ operated in part through the housing market, and that is an important reason why the China shock was as big as it was. If housing prices had not responded at all to the China shock, then the total employment effect of the China shock would have been reduced by more than one-half. Housing prices in the United States did respond to the China shock, however, so the independent employment effect of the China shock is reduced by about 20–30%, with that remainder reflecting exogenous changes in housing prices.
{"title":"Magnification of the ‘China Shock’ Through the U.S. Housing Market","authors":"Yuanbin Xu, Hong Ma, R. Feenstra","doi":"10.3386/w26432","DOIUrl":"https://doi.org/10.3386/w26432","url":null,"abstract":"The ‘China shock’ operated in part through the housing market, and that is an important reason why the China shock was as big as it was. If housing prices had not responded at all to the China shock, then the total employment effect of the China shock would have been reduced by more than one-half. Housing prices in the United States did respond to the China shock, however, so the independent employment effect of the China shock is reduced by about 20–30%, with that remainder reflecting exogenous changes in housing prices.","PeriodicalId":21047,"journal":{"name":"Real Estate eJournal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2019-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"75806980","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}
Coworking providers, like WeWork, have shifted the competitive landscape for office tenants through differentiating office amenities, leasing fully-equipped desks or offices over flexible time periods. However, even though coworking providers are a tenant type in consumer demand, little is known about the strategic interaction of this growing tenant with landlords in the real estate sector. In this paper, we assess landlord-coworking provider interaction through lease contract valuation, assessing if landlords see coworking providers as a substitute, benefit or risk, compared to other tenants. Using lease contracts from six US cities between 2008 to 2018, we compare rent conditions between coworking providers and tenants within the same building. We document that landlords treat coworking providers as substitutes not differentiating in effective rent compared to other tenants. Coworking providers take systematically longer lease durations, resulting in higher tenant incentives, such as free rent periods and tenant improvement concessions. Controlling for lease duration, coworking providers receive significantly more tenant concessions. We do not find value-increasing external effects of coworking providers, concluding that landlords are indifferent towards coworking tenants.
{"title":"The Financial Impacts of Coworking: Rental Prices and Market Dynamics in the Commercial Office Market","authors":"Andrea M. Chegut, M. Langen","doi":"10.2139/ssrn.3481142","DOIUrl":"https://doi.org/10.2139/ssrn.3481142","url":null,"abstract":"Coworking providers, like WeWork, have shifted the competitive landscape for office tenants through differentiating office amenities, leasing fully-equipped desks or offices over flexible time periods. However, even though coworking providers are a tenant type in consumer demand, little is known about the strategic interaction of this growing tenant with landlords in the real estate sector. In this paper, we assess landlord-coworking provider interaction through lease contract valuation, assessing if landlords see coworking providers as a substitute, benefit or risk, compared to other tenants. Using lease contracts from six US cities between 2008 to 2018, we compare rent conditions between coworking providers and tenants within the same building. We document that landlords treat coworking providers as substitutes not differentiating in effective rent compared to other tenants. Coworking providers take systematically longer lease durations, resulting in higher tenant incentives, such as free rent periods and tenant improvement concessions. Controlling for lease duration, coworking providers receive significantly more tenant concessions. We do not find value-increasing external effects of coworking providers, concluding that landlords are indifferent towards coworking tenants.","PeriodicalId":21047,"journal":{"name":"Real Estate eJournal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2019-10-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84227457","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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