Home About us Contact
|
Home About us Contact | ||
|
|
||
Estate Market (estate + market)
Kinds of Estate Market Selected AbstractsIlliquidity and Pricing Biases in the Real Estate MarketREAL ESTATE ECONOMICS, Issue 3 2007Zhenguo Lin This article addresses the micro-analytic foundations of illiquidity and price dynamics in the real estate market by integrating modern portfolio theory with models describing the real estate transaction process. Based on the notion that real estate is a heterogeneous good that is traded in decentralized markets and that transactions in these markets are often characterized by costly searches, we argue that the most important aspects defining real estate illiquidity in both residential and commercial markets are the time required for sale and the uncertainty of the marketing period. These aspects provide two sources of bias in the commonly adopted methods of real estate valuation, which are based solely on the prices of sold properties and implicitly assume immediate execution. We demonstrate that estimated returns must be biased upward and risks downward. These biases can be significant, especially when the marketing period is highly uncertain relative to the holding period. We also find that real estate risk is closely related to investors' time horizons, specifically that real estate risk decreases when the holding period increases. These results are consistent with the conventional wisdom that real estate is more favorable to long-term investors than to short-term investors. They also provide a theoretical foundation for the recent econometric literature, which finds evidence of smoothing of real estate returns. Our findings help explain the apparent risk-premium puzzle in real estate,that is, that ex post returns appear too high, given their apparent low volatility,and can lead to the formal derivation of adjustments that can define real estate's proper role in the mixed-asset portfolio. [source] Equilibrium Real Options Exercise Strategies with Multiple Players: The Case of Real Estate MarketsREAL ESTATE ECONOMICS, Issue 1 2006Ko Wang This article derives a closed-form solution for an equilibrium real options exercise model with stochastic revenues and costs for monopoly, duopoly, oligopoly and competitive markets. Our model also allows one option holder to have a greater production capacity than others. Under a monopolistic environment we find that the optimal option exercise strategy in real estate markets is dramatically opposite to that in a financial (warrant) market, indicating the importance of paying attention to the institutional details of the underlying market when analyzing option exercise strategies. Our model can be generalized to the pricing of convertible securities and capital investment decisions involving both stochastic revenues and costs under different types of market structures. [source] Relationships between Australian real estate and stock market prices,a case of market inefficiencyJOURNAL OF FORECASTING, Issue 3 2002John Okunev Abstract This paper explores the relationship between the Australian real estate and equity market between 1980 and 1999. The results from this study show three specific outcomes that extend the current literature on real estate finance. First, it is shown that structural shifts in stock and property markets can lead to the emergence of an unstable linear relationship between these markets. That is, full-sample results support bi-directional Granger causality between equity and real estate returns, whereas when sub-samples are chosen that account for structural shifts the results generally show that changes within stock market prices influence real estate market returns, but not vice versa. Second, the results also indicate that non-linear causality tests show a strong unidirectional relationship running from the stock market to the real estate market. Finally, from this empirical evidence a trading strategy is developed which offers superior performance when compared to adopting a passive strategy for investing in Australian securitized property. These results appear to have important implications for managing property assets in the funds management industry and also for the pricing efficiency within the Australian property market. Copyright © 2002 John Wiley & Sons, Ltd. [source] ECONOMIC VALUATION OF RIPARIAN BUFFER AND OPEN SPACE IN A SUBURBAN WATERSHED1JOURNAL OF THE AMERICAN WATER RESOURCES ASSOCIATION, Issue 6 2006Zeyuan Qiu Abstract: This study evaluates the economic value of riparian buffers and open space in a suburban watershed through two nonmarket valuation methods. A contingent valuation survey was implemented in the Dardenne Creek watershed, a suburban watershed of the St. Louis metropolitan area in Missouri, to evaluate the residents' perceptions of and willingness to pay (WTP) for adopting riparian buffers and preserving farmland in a hypothetical real estate market. A hedonic pricing model based on actual sale prices of homes in the watershed was applied to estimate the market value of open space and other environmental conditions such as flood zone and stream proximity in the study area. The results showed that residents' WTP was consistent with the economic values of open space and proximity to streams embedded in existing home prices. Through a better understanding of residents' perceptions and values, riparian buffer and open space programs can be designed and promoted to achieve greater implementation success and environmental benefit. [source] Old Habits Are Hard to Change: A Case Study of Israeli Real Estate ContractsLAW & SOCIETY REVIEW, Issue 2 2010Doron Teichman This article presents a case study on the persistent dollarization norm in the Israeli real estate market. For many years Israeli real estate contracts have been denominated in American dollars. This contracting norm has remained surprisingly stable despite tremendous changes in the structure of the Israeli foreign currency market that severed the connection between the dollar and local inflation and added significant risks to exchange rates. Using an array of theoretical tools, I explain this puzzling phenomenon and demonstrate the centrality of social norms to the design of high-stakes contracts. Finally, I explore the interaction between social norms and the law and highlight the potential obstacles to regulating contracting norms. [source] Consumption, Housing Rents and Housing Price: A Test Of A Real Estate Pricing Model Using Hong Kong DataPACIFIC ECONOMIC REVIEW, Issue 1 2003Francis K. Cheung The present study investigates whether Hong Kong's volatile real estate market is consistent with a non,linear consumption,based,asset,pricing model. It finds that the asset,pricing model is not rejected for some types of properties. However, the differentials between the returns to residential properties and risk,free rate are too large to be explained by the model. [source] If You Promise to Build It, Will They Come?REAL ESTATE ECONOMICS, Issue 2 2009The Interaction between Local Economic Development Policy, the Real Estate Market: Evidence from Tax Increment Finance Districts The analysis in this article examines the impacts of one of the more prominent economic development tools, tax increment financing (TIF) districts, on the local commercial real estate market. The study area is the city of Chicago, a community with a long history of reliance on TIF districts as a means to foster local development initiatives. A treatment effects model is used to address the selection bias often attributed to studies of public policy impacts on real estate markets. The results indicate that commercial properties located within designated TIF districts exhibit higher rates of appreciation after the area is designated a qualifying TIF district. [source] Estimating the House Foreclosure Discount Corrected for Spatial Price Interdependence and Endogeneity of Marketing TimeREAL ESTATE ECONOMICS, Issue 1 2009Terrence M. Clauretie Most previous empirical research estimates a greater than 20% discount associated with the sale of foreclosed properties. Under the assumption that the real estate market is somewhat efficient, such a large discount would be counterintuitive. We argue, and empirically show, that the estimated foreclosure coefficients in most of the previous research are upward biased because they do not control for variables such as the physical condition of the property and the relationship between marketing time and price. Accounting for these factors and correcting for two types of spatial price interdependence, our results show that estimates of foreclosure discount reported by previous studies are about one-third higher than the true discount caused by foreclosure per se. [source] Illiquidity and Pricing Biases in the Real Estate MarketREAL ESTATE ECONOMICS, Issue 3 2007Zhenguo Lin This article addresses the micro-analytic foundations of illiquidity and price dynamics in the real estate market by integrating modern portfolio theory with models describing the real estate transaction process. Based on the notion that real estate is a heterogeneous good that is traded in decentralized markets and that transactions in these markets are often characterized by costly searches, we argue that the most important aspects defining real estate illiquidity in both residential and commercial markets are the time required for sale and the uncertainty of the marketing period. These aspects provide two sources of bias in the commonly adopted methods of real estate valuation, which are based solely on the prices of sold properties and implicitly assume immediate execution. We demonstrate that estimated returns must be biased upward and risks downward. These biases can be significant, especially when the marketing period is highly uncertain relative to the holding period. We also find that real estate risk is closely related to investors' time horizons, specifically that real estate risk decreases when the holding period increases. These results are consistent with the conventional wisdom that real estate is more favorable to long-term investors than to short-term investors. They also provide a theoretical foundation for the recent econometric literature, which finds evidence of smoothing of real estate returns. Our findings help explain the apparent risk-premium puzzle in real estate,that is, that ex post returns appear too high, given their apparent low volatility,and can lead to the formal derivation of adjustments that can define real estate's proper role in the mixed-asset portfolio. [source] Errors in Variables, Links between Variables and Recovery of Volatility Information in Appraisal-Based Real Estate Return IndexesREAL ESTATE ECONOMICS, Issue 4 2006Peijie Wang The present article proposes a multivariate approach to unsmoothing appraisal-based real estate return indexes to recover the true market volatility information in real estate returns. It scrutinizes the role played by errors in variables, in conjunction with an analysis of other economic activities relevant to real estate returns, to exploit the functional relationship and the mechanism of interactions between real estate returns and these economic activities. Appraisal smoothing can therefore be detected and corrected properly and efficiently, without presuming a weakly efficient real estate market. The approach is then applied to U.K. real estate indexes as empirical examples. The results suggest a reasonable volatility in U.K. real estate investment that is close to reality. It is found that the volatility of the true market return on real estate is 1.5404,1.9282 times that of the return on the appraisal-based indexes, in contrast to figures of 2.4862,5.8720 produced by the fully unsmoothing procedure. [source] The Role of the Underlying Real Asset Market in REIT IPOsREAL ESTATE ECONOMICS, Issue 1 2005Jay C. Hartzell A leading explanation for IPO cycles is time-varying supply and demand for the underlying assets of the firms that are considering going public. We test this hypothesis using REIT IPOs, taking advantage of the relative transparency of the underlying real asset markets. We document links between REIT IPO activity and both the conditions of the underlying real estate market and the price of REITs. We find no significant relation between the heat of the IPO market and post-IPO operating performance, implying homogeneous firm quality across IPO cycles. Finally, we show that lagged IPO proceeds are related to future increases in investment and in capacity utilization. [source] Organizational Challenges and Strategic Responses of Retail TNCs in Post-WTO-Entry ChinaECONOMIC GEOGRAPHY, Issue 1 2009Wance Tacconelli abstract In the context of a market characterized by the enduring legacy of socialism through governmental ownership of retail businesses, the continued presence of domestic retailers, and increasing levels of competition, this article examines the organizational challenges faced by, and the strategic responses adopted by, a group of leading food and general merchandise retail transnational corporations (TNCs) in developing networks of stores in the post-WTO-entry Chinese market. On the basis of extensive interview-based fieldwork conducted in China from 2006 to 2008, the article details the attempts of these retail TNCs to embed their operations in Chinese logistics and supply networks, real estate markets, and consumer cultures,three dimensions that are fundamental to the achievement of market competitiveness by the retail TNCs. The article illustrates how this process of territorial embeddedness presents major challenges for the retail TNCs and how their strategic responses vary substantially, indicating different routes to the achievement of organizational legitimacy in China. The article concludes by offering an analysis of the various strategic responses of the retail TNCs and by suggesting some future research propositions on the globalization of the retail industry. [source] The Liquidity of Property Shares: An International ComparisonREAL ESTATE ECONOMICS, Issue 3 2009Dirk Brounen This article investigates the magnitude and determinates of share liquidity over the 1990,2007 period in the world's four largest securitized real estate markets: the United States, the United Kingdom, Continental Europe and Australia. We document a significant and consistent role for market capitalization, nonretail share ownership and dividend yield as drivers of liquidity across markets. We also document significant differences in liquidity across countries and between property and nonproperty companies. Also striking is the lack of correlation among our three measures of liquidity across property firms and time. This supports the notion that share price liquidity is multifaceted and therefore reliance on any one measure of liquidity in empirical work may produce misleading conclusions. Although we find some evidence of a connection between liquidity and firm value, it is less conclusive than prior studies. [source] If You Promise to Build It, Will They Come?REAL ESTATE ECONOMICS, Issue 2 2009The Interaction between Local Economic Development Policy, the Real Estate Market: Evidence from Tax Increment Finance Districts The analysis in this article examines the impacts of one of the more prominent economic development tools, tax increment financing (TIF) districts, on the local commercial real estate market. The study area is the city of Chicago, a community with a long history of reliance on TIF districts as a means to foster local development initiatives. A treatment effects model is used to address the selection bias often attributed to studies of public policy impacts on real estate markets. The results indicate that commercial properties located within designated TIF districts exhibit higher rates of appreciation after the area is designated a qualifying TIF district. [source] Land Leverage: Decomposing Home Price DynamicsREAL ESTATE ECONOMICS, Issue 2 2007Raphael W. Bostic This article demonstrates the importance of separating the bundled good of housing into land and improvements, arguing that changes in a property's overall value will depend critically on how much of its total value is contained in the land, a proportion we call land leverage. The importance of this deconstruction is demonstrated by highlighting how land leverage helps to explain variation in house price appreciation in Wichita, Kansas. Noting that land leverage should be relevant for many real estate issues and policies, we highlight four specific areas where consideration of land leverage could significantly improve our understanding of real estate markets. Land is the only thing in the world that amounts to anything , for ,tis the only thing in this world that lasts, and don't you be forgetting it!,Tis the only thing worth working for, worth fighting for,worth dying for. Gerald O'Hara in Gone with the Wind1 [source] Equilibrium Real Options Exercise Strategies with Multiple Players: The Case of Real Estate MarketsREAL ESTATE ECONOMICS, Issue 1 2006Ko Wang This article derives a closed-form solution for an equilibrium real options exercise model with stochastic revenues and costs for monopoly, duopoly, oligopoly and competitive markets. Our model also allows one option holder to have a greater production capacity than others. Under a monopolistic environment we find that the optimal option exercise strategy in real estate markets is dramatically opposite to that in a financial (warrant) market, indicating the importance of paying attention to the institutional details of the underlying market when analyzing option exercise strategies. Our model can be generalized to the pricing of convertible securities and capital investment decisions involving both stochastic revenues and costs under different types of market structures. [source] Assessing the Forecasting Performance of Regime-Switching, ARIMA and GARCH Models of House PricesREAL ESTATE ECONOMICS, Issue 2 2003Gordon W. Crawford While price changes on any particular home are difficult to predict, aggregate home price changes are forecastable. In this context, this paper compares the forecasting performance of three types of univariate time series models: ARIMA, GARCH and regime-switching. The underlying intuition behind regime-switching models is that the series of interest behaves differently depending on the realization of an unobservable regime variable. Regime-switching models are a compelling choice for real estate markets that have historically displayed boom and bust cycles. However, we find that, while regime-switching models can perform better in-sample, simple ARIMA models generally perform better in out-of-sample forecasting. [source] Does the Lender Matter?CANADIAN JOURNAL OF ADMINISTRATIVE SCIENCES, Issue 4 2002Home Office Location, Lender Type, Real Estate Development Lending Inter-regional expansion and merger and acquisition activity triggered by regulatory reforms are changing the structure of North America's financial industry. Increases in concentration and the belief that large and small financial institutions specialize in distinct segments of the lending market have raised concerns among some that these industry changes will have real effects on the availability and access to credit for distinct classes of borrowers, especially smaller firms. This paper examines this issue by looking at differences across lenders in the financing of residential construction by lender type and home office location (local versus out-of-province). The analysis has two components. The first is a descriptive data analysis for evidence that smaller, local lenders provide capital to more marginal and infra-marginal borrowers. The second is a test of whether lenders active in multiple jurisdictions allocate loan capital for real estate efficiently. To evaluate these issues, the paper uses data on over 1,300 senior and junior construction loans in the Vancouver, BC, metropolitan area. We find that local lenders do seem to behave differently, charging lower spreads and extending credit to more marginal or less well capitalized developers. However, contrary to the claims of many Vancouver developers, lenders in Central Canada did not limit credit to British Columbia when their home real estate markets turned down in the late 1980s and early 1990s. Instead, the lending volume and market share in the Vancouver market of lenders based outside of BC rose when the relative condition of their home real estate markets worsened. Résumé La fusion et l'expansion inter-régionales, l'acquisition des activités déclenchée par les reformes régulatrices modifient la structure des industries financières nord-américaines. Les accroissements de la concentration et la croyance en la spécialisation des petites et des grandes institutions financières dans différents secteurs du marché de prêt ont amené les uns à s'inquiéter du fait que certains de ces changements industriels peuvent avoir des effets certains sur la disponibilité et l'accès au crédit à des classes distinctes d'emprunteurs et en particulier aux petites firmes. Le présent article examine cette question en analysant les différences entre les prêteurs dans le financement des constructions résidentielles suivant le type de prêteur et le lieu d'implantation de son établissement principal (dans la province par opposition à hors de la province). L'analyse a deux composantes: la première est l'analyse descriptive des données dans le but de montrer que les petits prêteurs locaux fournissent des capitaux à plus d'emprunteurs marginaux et infra-marginaux. La seconde composante est un test qui vise à savoir si les prêteurs actifs dans plusieurs juridictions allouent efficacement des capitaux d'emprunts aux compagnies immobilières. Pour évaluer ces questions, l'article utilise des données de plus de 1300 prêts de constructions primaires et secondaires dans la zone métropolitaine de Vancouver, en Colombie Brittanique. Notre travail permet de constater que les prêteurs locaux semblent se comporter différemment, demandant des marges plus basses et accordant des crédits à des promoteurs immobiliers plus marginaux ou nettement moins capitalisés. Cependant, contrairement aux déclarations de plusieurs promoteurs immobiliers de Vancouver, les prêteurs du Canada Centre ne s'étaient pas limités à la Colombie Britannique dans l'octroi des crédits quand leurs marchés des propriétés immobilières avaient fléchi à la fin des années 1980 au début des années 1990. Bien au contraire, le volume de prêt et la part de marché dans le marché de Vancouver des prêteurs installés hors de la Colombie Britannique s'est accru quand la condition relative de leurs marchés immobiliers a empiré. [source] | |||||||||||||