UCLA Real Estate Wire

The Demand for Small Apartments in Superstar Cities

This NY Times piece discusses the demand for 400 square foot apartments in hip parts of NYC.  In housing markets where the price per sqft is high, this must mean that the quality of the area is terrific but demand curves do slope down and middle class people can only afford to live in such areas if they reduce the number of square feet they consume.  This article walks the reader through the costs and benefits of living in such housing.  I did not know that Mayor Bloomberg seeks for more people to live this "Tokyo" style life. Can Americans change their ways and downsize? I would guess that there is certain segment of the population who are neat enough and don't mind having their bed so close to their kitchen.  

The LA Times Has a Nice Write Up About my New "Green Homes" Price Premium Paper

Here is an article from today's LA Times that reports about my new empirical study (joint with my friend Nils Kok).  We use data on the sales price of homes throughout the California area in recent years and merge in data indicating whether the home is Energy Star Certified.  Across a variety of econometric specifications, we find that "green homes" sell for a price premium of 8%. That's big and we are still investigating this effect but it is an important finding in substantiating the claim that the "green economy" offers value for those who invest in it.

Eminent Domain and the Government Seizing Mortgages: The Game of Chicken Continues

Amir Sufi is a leading economist at the University of Chicago's Booth School of Business. In this piece for Bloomberg, he discusses the merits of allowing California cities such as Stockton and San Bernardino to seize mortgage contracts and reset the terms to forgive enough debt so that borrowers are no longer under water. If this threat to seize the mortgage is credible, then this will put tremendous pressure on lenders to renegotiate terms with borrowers.  Future borrowers will also pay an interest premium (especially those with high LTV and low fico score) once this precedent is in place.

The comments posted at the end of the piece are also worth reading.  This is a very important real estate policy topic.  The case for the "haircut" will continue to be debated.

 

 

Important New Federal Reserve Bank of NY Study Documenting Recent Housing Trends

My old friend and co-author Dr. Joe Tracy has released a new working paper.  This real estate pricing trends paper offers some great graphs.   Here is an example.  Read their paper!  I give the paper's punchline below.

 

Here is their conclusion.

Overall Health Assessment

 
The stabilization of the housing market suggested by various national indicators is corroborated by looking at a number of indicators disaggregated to the county level. Importantly, the median county is now experiencing stable house prices on a year-over-year basis. Transaction volumes in most markets, while still far below normal, have steadied. Finally, the share of distressed sales, although still very high in many markets, appears to have peaked. If these trends continue, then local housing markets are making progress in their convalescence. However, our analysis indicates that most local housing markets still have a way to go to achieve a clean bill of health.

 

 

Discrimination in Housing Markets

Consider a specific home such as 583 Warner Avenue in Los Angeles.  Suppose that a white family sells this home to another white family and a few years later this family sells it to a black family.  A researcher who observes the same home sold at several points in time can estimate a "repeat sales" model to see whether blacks pay more for the same housing than whites.  The answer according to this study  is that blacks pay 4% more than whites for the same home.   Is this a lot of "discrimination"?  That is for you to decide.   Note the key to this empirical design is observing the same home sold to whites at some point in time while it sold to a black family at a different point in time. If a given home was only sold to black families or to white families, such a home would offer no "within variation" and a repeat sales approach could not be used to study for pricing discrimination.

Here is the paper's abstract:

Price Discrimination in the Housing Market

Patrick Bayer, Marcus D. Casey, Fernando Ferreira, Robert McMillan

NBER Working Paper No. 18069
Issued in May 2012
NBER Program(s):   PE 

This paper sets out a new research design to test for price discrimination by sellers in the housing market. The design controls carefully for unobserved differences in the quality of neighborhoods and homes purchased by buyers of each race, using novel panel data from over two million repeat-sales housing transactions in four metropolitan areas. The results indicate that black and Hispanic homebuyers pay premiums of around 3 percent on average across the four cities – differences that are not explained by variation in buyer income, wealth or access to credit. The estimated premiums do not vary significantly with the racial composition of the neighborhood or, most strikingly, the race of the seller. This latter result rules out racial prejudice or animosity on the part of sellers as the primary explanation for the estimated premiums.

 

 

 

Hotels in Singapore

I have been in Singapore for a week.  I have been staying at the Marina Bay Sands Hotel.  It is a spectacular piece of real estate.   The hotel is built on reclaimed land in an area that was "water" just a few decades ago.   A leading academic real estate conference will soon take place at the hotel.