Search

In this paper, we explore whether a program of housing loan subsidies introduced in Croatia contributed to housing price increases. The subsidy was designed to cover a portion of annuities in the initial period of the housing loan repayment, with a distinct feature that a household could apply for the subsidy only during a month-long period. Using a dataset on housing transactions we document that the subsidy disrupted the usual intra-annual dynamics of residential transactions as they became very concentrated in the month when housing loan subsidy applications ended. However, we do not find any descriptive evidence that the aggregate homeownership rate increased. Using an event study approach we find that the housing prices increased just around the introduction of the subsidy, especially in the most developed municipalities which absorbed more than 60% of the subsidies. Exploiting the subsidy built-in implementation rules we identify the effect of the subsidy via a dynamic difference-in-difference approach which corroborates our baseline conclusions. Using the regional variation in the subsidy intensity, we also find that housing price capitalization was driven by prices in areas and regions with already active housing markets. Finally, to discard the possibility that the observed housing price increase is confounded by tourism, we also explore the nexus between tourism and the housing market in Croatia and conclude that our baseline results hold.

While previous studies have attempted to measure property tax rate capitalizations by proximate housing prices, disentangling school quality, and its associated amenities, from tax rates has impeded accurate estimation. I overcome this issue by investigating school districts containing varying tax rates. Identification is derived from the use of school and spatial-temporal boundary fixed effects to eliminate unobserved variation associated with tax districts that can confound capitalization estimates. Results from the primary model provide evidence of a negative capitalization of tax rate levels that corresponds to full capitalization at discount rate of nearly 3.5 percent. Further, property fixed effects are uniquely incorporated within the boundary identification method to show that tax rate changes are capitalized similar to baseline tax rate differences.

Housing taxation is a main policy instrument shaping households choices about homeownership and renting as well as the evolution of the housing market. We study the effects of housing taxation in a model with search and matching frictions in the property market and a competitive rental market. We show a new transmission channel of a housing tax reform that works through a “shifting” of the tax burden on secondary homes from landlords to tenants through rental prices. Property taxation affects house prices not only through the change in the user cost but also via the impact on housing rental services, as measured by the rental prices. We calibrate the model in order to estimate the effects of the recent Italian housing market taxation reforms and the extent of property taxes capitalization in house prices. We show that property taxation on owner-occupied dwellings has a negative effect on property and rental prices, whereas taxes on secondary homes have qualitative opposite effects. The simultaneous increase of both these instruments may mitigate the dynamics of prices and rents as well as the change of the ratio between the share of owners and renters, determining a partial capitalization of taxation on prices.

We evaluate the effects of CDO issuance on the pricing of subprime mortgage-backed securities. Upon controlling for mortgage option values and other well-established determinants of credit spreads, GMM results indicate that the emergence and rapid capitalization of the subprime-backed CDO market was associated with a significant tightening of subprime MBS/Treasury yield spreads. Results of VAR and other robustness tests serve to corroborate the findings. Dynamic simulation based on the impulse response functions shows substantial subprime MBS spread widening in the wake of implosion in the CDO market. Those effects likely were passed back to the primary market in the form of diminished investor demand and related reduced pricing of subprime loans. Research findings also suggest the importance of supply/demand shocks associated with innovations in derivative securities markets to the pricing of securitized subprime debt.

The hedonic modeling literature is rich with analyses of the importance of public school quality on real estate markets. In this paper, spatial dependency is incorporated in a hedonic model based on housing, neighborhood, demographic, and school quality attributes readily available on the Internet for home sales in Howard County, Maryland. The importance of using readily available measures is that perceptions in the public are formed by them. The study also addresses potential omitted variable bias by incorporating school assessment measures over the K-12 grade range. The consideration of spatial dependency in hedonic models is imperative since the findings are sensitive to appropriately modeling the spatial component of home prices. The results indicate that there is consistent and significant evidence of the capitalization of 8th grade test scores and SAT scores in home prices, and inconsistent evidence of the capitalization of 3rd grade test scores. The elasticities of house price with respect to test scores are all in the inelastic range and smaller than those found in other studies. This study provides clear guidance on how to test for spatial heterogeneity and non-normality of error terms before proceeding with hedonic analysis.

This study focuses on explaining variations in real constant-quality house prices in jurisdictions located in multiple MSAs. Using a hedonic house price framework, we test competing theories of house price determination. Using two variants of the random coefficients model, we find that public school quality has a very large impact on real constant-quality house prices. Our results suggest that capitalization of school quality differences occurs on a per lot basis rather than per square foot of land. Also important to the explanation of variations in house prices are variables derived from urban theory, such as distance to the CBD, and from the amenity literature, such as a community's crime rate, arts, and recreational opportunities

Brokerage services have long been an integral part of property exchanges; yet, our understanding of how brokerage services influence sales prices of properties is quite limited. While recent papers have advanced the much needed theory on this and related questions, the empirical evidence is modest and comes only from single family residential property markets. This study provides new evidence from Ocean City, Maryland summer vacation condiminium markets. Because the majority of the property owners and potential buyers in resort towns are not permanent residents of these towns, both parties may face high search costs and, as a result, prefer to recruit a broker. This increased demand for brokerage services may potentially increase the extent of capitalization of brokerage commissions into property sales prices in the form of higher broker-assisted property prices. On the other hand, homogeneity of the properties should reduce uncertainty about prices, making it more difficult to pass on commissions to buyers. This study reports evidence of full capitalization of brokerage commissions in the Ocean City, Maryland summer vacation condominium markets.

In this paper, we investigate how an unanticipated productivity shift affects capital accumulation and the relative asset price in an overlapping generations economy with two assets: capital and housing. We show that a positive shift leads to an increase in both the capital stock and the price of the housing asset and, therefore, to an increase in nonhousing consumption. We also show that the inclusion of a relative asset price effect increases the short-term responsiveness of nonhousing consumption to the productivity shift. For the young generation, who are not homeowners, the immediate effects of a productivity shift on nonhousing consumption are the same regardless of relative asset price effects. For the old generation, who are homeowners at the time of the shift, the presence of a housing capitalization effect increases the responsiveness of nonhousing consumption.

To measure the impact of zoning, most studies include a set of dummy variables representing various land-use classifications in the hedonic housing equation. There are two problems with this specification. First, zoning regulations are multidimensional; they restrict the choice of specific housing characteristics in addition to constraining the use of land. Second, treating zoning solely as a shift parameter ignores the potential capitalization of zoning into the implicit prices of housing characteristics. In this paper we develop a theoretical model that accounts for both characteristics zoning and capitalization effects and derive the appropriate econometric specification. Our empirical results indicate that zoning regulations do affect the implicit prices of housing characteristics and that excluding characteristics zoning from the hedonic equation biases the estimated impact of land-use zoning.