Jawad M. Addoum, Piet Eichholtz, Eva Steiner, Erkan Yönder
Abstract We study how professional investors capitalize flood risk in commercial real estate (CRE) markets after hurricane Sandy. We show that New York CRE exposed to flood risk trades at a large, persistent discount. CRE in Boston, which mostly escaped direct hurricane‐related damage, also exhibits persistent price penalties. These price effects are driven by asset‐level capitalization rates, not building occupancy. Results from a placebo test using real estate prices in Chicago show that our inferences are not driven by coincidental, unrelated price trends for waterfront real estate assets. Our results are consistent with professional investors responding to a persistent shift in the salience of flood risk post‐Sandy, even in locations spared by the disaster.
{"title":"Climate change and commercial real estate: Evidence from Hurricane Sandy","authors":"Jawad M. Addoum, Piet Eichholtz, Eva Steiner, Erkan Yönder","doi":"10.1111/1540-6229.12435","DOIUrl":"https://doi.org/10.1111/1540-6229.12435","url":null,"abstract":"Abstract We study how professional investors capitalize flood risk in commercial real estate (CRE) markets after hurricane Sandy. We show that New York CRE exposed to flood risk trades at a large, persistent discount. CRE in Boston, which mostly escaped direct hurricane‐related damage, also exhibits persistent price penalties. These price effects are driven by asset‐level capitalization rates, not building occupancy. Results from a placebo test using real estate prices in Chicago show that our inferences are not driven by coincidental, unrelated price trends for waterfront real estate assets. Our results are consistent with professional investors responding to a persistent shift in the salience of flood risk post‐Sandy, even in locations spared by the disaster.","PeriodicalId":47731,"journal":{"name":"Real Estate Economics","volume":"161 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-04-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134955099","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Jeffrey P. Cohen, Cletus C. Coughlin, Jonas Crews, Stephen L. Ross
Abstract Using a unique dataset, we examine various effects of closing Denver's Stapleton Airport, and subsequent redevelopment, on nearby housing markets. We find immediate anticipatory price effects upon announcement, but no price changes at closing and little evidence of upward trending prices between announcement and closing. Post‐closure, more higher income and fewer Black households moved in, and developers built larger houses on larger lots. Increases in the price of pre‐existing housing are also found. Finally, we find that post‐closing price increases were largest in areas that were closest to the center of new commercial development and that had greater exposure to new housing construction.
{"title":"Longer term housing market effects of a major US airport closure","authors":"Jeffrey P. Cohen, Cletus C. Coughlin, Jonas Crews, Stephen L. Ross","doi":"10.1111/1540-6229.12433","DOIUrl":"https://doi.org/10.1111/1540-6229.12433","url":null,"abstract":"Abstract Using a unique dataset, we examine various effects of closing Denver's Stapleton Airport, and subsequent redevelopment, on nearby housing markets. We find immediate anticipatory price effects upon announcement, but no price changes at closing and little evidence of upward trending prices between announcement and closing. Post‐closure, more higher income and fewer Black households moved in, and developers built larger houses on larger lots. Increases in the price of pre‐existing housing are also found. Finally, we find that post‐closing price increases were largest in areas that were closest to the center of new commercial development and that had greater exposure to new housing construction.","PeriodicalId":47731,"journal":{"name":"Real Estate Economics","volume":"486 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-03-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135822668","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract In this study, we investigate the capitalization of flight accident risk in housing prices near military bases in Virginia from 2003 to 2016. We focus on a localized shock caused by a fighter jet crash into an apartment complex near the Naval Air Station Oceana in Virginia Beach. Although flight accident hazards were transparently disclosed by sellers and local governments years beforehand, the crash led to a temporary (approximately 3 years) decline in the prices of properties within accident potential zones (APZ) and by a lesser magnitude, properties slightly outside the APZ boundaries. This analysis sheds light on how market participants react after an extreme event, emphasizing the role of recency in the capitalization of risk.
{"title":"Risk perception in housing markets: Evidence from a fighter jet crash","authors":"Walter D'Lima, Timothy Komarek, Luis A. Lopez","doi":"10.1111/1540-6229.12432","DOIUrl":"https://doi.org/10.1111/1540-6229.12432","url":null,"abstract":"Abstract In this study, we investigate the capitalization of flight accident risk in housing prices near military bases in Virginia from 2003 to 2016. We focus on a localized shock caused by a fighter jet crash into an apartment complex near the Naval Air Station Oceana in Virginia Beach. Although flight accident hazards were transparently disclosed by sellers and local governments years beforehand, the crash led to a temporary (approximately 3 years) decline in the prices of properties within accident potential zones (APZ) and by a lesser magnitude, properties slightly outside the APZ boundaries. This analysis sheds light on how market participants react after an extreme event, emphasizing the role of recency in the capitalization of risk.","PeriodicalId":47731,"journal":{"name":"Real Estate Economics","volume":"99 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-03-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"136338735","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Do opportunity zones create opportunities? The impact of opportunity zones on real estate prices","authors":"J. Alm, Trey Dronyk-Trosper, Sean P Larkin","doi":"10.1111/1540-6229.12434","DOIUrl":"https://doi.org/10.1111/1540-6229.12434","url":null,"abstract":"","PeriodicalId":47731,"journal":{"name":"Real Estate Economics","volume":"14 1","pages":""},"PeriodicalIF":2.2,"publicationDate":"2023-03-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86238448","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Exciting, Boring, and Nonexistent Skylines: Vertical Building Gaps in Global Perspective","authors":"Jason Barr, Remi Jedwab","doi":"10.1596/1813-9450-10365","DOIUrl":"https://doi.org/10.1596/1813-9450-10365","url":null,"abstract":"","PeriodicalId":47731,"journal":{"name":"Real Estate Economics","volume":"9 1","pages":""},"PeriodicalIF":2.2,"publicationDate":"2023-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89675313","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract In December 2017, the U.S. Congress passed into law the Opportunity Zone (OZ) program. As an OZ, designated low‐income census tracts provide considerable tax breaks to property investors, intending to attract investments and spur economic growth. As the success of the program is dependent on investors' responses, we analyze market reactions in a difference‐in‐differences framework. We identify two potential effects on property markets: tax breaks for investors and expected land value appreciation. Our results show that tax breaks are priced efficiently. Qualified properties increase by 7–20% in price, while vacant land increase up to 37%. In contrast, we find limited signs of expected land value appreciation.
{"title":"Where is the opportunity in opportunity zones?","authors":"Alan Sage, Mike Langen, Alex van de Minne","doi":"10.1111/1540-6229.12429","DOIUrl":"https://doi.org/10.1111/1540-6229.12429","url":null,"abstract":"Abstract In December 2017, the U.S. Congress passed into law the Opportunity Zone (OZ) program. As an OZ, designated low‐income census tracts provide considerable tax breaks to property investors, intending to attract investments and spur economic growth. As the success of the program is dependent on investors' responses, we analyze market reactions in a difference‐in‐differences framework. We identify two potential effects on property markets: tax breaks for investors and expected land value appreciation. Our results show that tax breaks are priced efficiently. Qualified properties increase by 7–20% in price, while vacant land increase up to 37%. In contrast, we find limited signs of expected land value appreciation.","PeriodicalId":47731,"journal":{"name":"Real Estate Economics","volume":"260 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-02-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135582734","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Heterogeneity in property tax capitalization: Evidence from municipalities in wisconsin","authors":"Sergio Gárate, A. Pennington‐Cross","doi":"10.1111/1540-6229.12430","DOIUrl":"https://doi.org/10.1111/1540-6229.12430","url":null,"abstract":"","PeriodicalId":47731,"journal":{"name":"Real Estate Economics","volume":"49 1","pages":""},"PeriodicalIF":2.2,"publicationDate":"2023-02-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85094400","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Sonia Gilbukh, A. Haughwout, R. Landau, Joseph S. Tracy
We examine the potential for the price-to-rent ratio to be used as a macroprudential tool. Standardized appraisal methods, such as the comparable sales and replacement cost appraisal are not designed to identify speculative housing markets. In addition to these methods, appraisers could estimate the current market rent for a property. We argue that the resulting price-to-rent ratio would provide a useful signal for speculative pressures. We show this by estimating price-to-rent ratios for home purchases using the American Housing Survey. We document that the distribution of priceto-rent ratios shifted up dramatically during the housing boom. We illustrate how the price-to-rent ratio could be incorporated into a lending policy so as to generate countercyclical loan-to-value ratios. These represent the views of the authors and not necessarily the views of the Federal Reserve Bank of New York or the Federal Reserve Bank of Dallas We thank Rachel Schuh and Noah Kwicklis for their expert research assistance.
{"title":"The price to rent ratio: A macroprudential application","authors":"Sonia Gilbukh, A. Haughwout, R. Landau, Joseph S. Tracy","doi":"10.1111/1540-6229.12431","DOIUrl":"https://doi.org/10.1111/1540-6229.12431","url":null,"abstract":"We examine the potential for the price-to-rent ratio to be used as a macroprudential tool. Standardized appraisal methods, such as the comparable sales and replacement cost appraisal are not designed to identify speculative housing markets. In addition to these methods, appraisers could estimate the current market rent for a property. We argue that the resulting price-to-rent ratio would provide a useful signal for speculative pressures. We show this by estimating price-to-rent ratios for home purchases using the American Housing Survey. We document that the distribution of priceto-rent ratios shifted up dramatically during the housing boom. We illustrate how the price-to-rent ratio could be incorporated into a lending policy so as to generate countercyclical loan-to-value ratios. These represent the views of the authors and not necessarily the views of the Federal Reserve Bank of New York or the Federal Reserve Bank of Dallas We thank Rachel Schuh and Noah Kwicklis for their expert research assistance.","PeriodicalId":47731,"journal":{"name":"Real Estate Economics","volume":"76 1","pages":""},"PeriodicalIF":2.2,"publicationDate":"2023-02-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"83897580","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract We provide a systematic study of how financial and real estate uncertainty affect the aggregate return performance of the U.S. REIT market from 1994 to 2017. A temporal causality analysis reveals a negative uncertainty impact on REIT returns. The asset pricing analysis confirms the predictive relation and suggests that REITs are statistically significantly exposed to changes in market‐wide uncertainty, for which investors require a return compensation. We also identify economic state variables to explain time‐varying uncertainty exposures as well as periodic hedging characteristics of REITs. Finally, we find evidence that the source of uncertainty matters for compensating expected REIT returns.
{"title":"Uncertainty premia in REIT returns","authors":"Marton Lotz, Daniel Ruf, Johannes Strobel","doi":"10.1111/1540-6229.12423","DOIUrl":"https://doi.org/10.1111/1540-6229.12423","url":null,"abstract":"Abstract We provide a systematic study of how financial and real estate uncertainty affect the aggregate return performance of the U.S. REIT market from 1994 to 2017. A temporal causality analysis reveals a negative uncertainty impact on REIT returns. The asset pricing analysis confirms the predictive relation and suggests that REITs are statistically significantly exposed to changes in market‐wide uncertainty, for which investors require a return compensation. We also identify economic state variables to explain time‐varying uncertainty exposures as well as periodic hedging characteristics of REITs. Finally, we find evidence that the source of uncertainty matters for compensating expected REIT returns.","PeriodicalId":47731,"journal":{"name":"Real Estate Economics","volume":"11 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-01-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"136117210","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Nature of comovements in U.S. State, and MSA housing prices","authors":"Alan Tidwell, Y. Lu, Junsoo Lee, Piyali Banerjee","doi":"10.1111/1540-6229.12428","DOIUrl":"https://doi.org/10.1111/1540-6229.12428","url":null,"abstract":"","PeriodicalId":47731,"journal":{"name":"Real Estate Economics","volume":"47 1","pages":""},"PeriodicalIF":2.2,"publicationDate":"2023-01-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85294252","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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