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A study to examine the important role of sponsor of the asset backed securities during the financial crisis is presented. The sponsor's critical role in the securitization process is highlighted using the security's coupon and rating. The survival time of a security until downgrade sharply increases with the credit rating and the amount of capital held by the sponsor.

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jue.2008.03.003 Byline: Laarni Bulan (a), Christopher Mayer (b)(c), C. Tsuriel Somerville (d) Abstract: We examine the extent to which uncertainty delays investment, and the effect of competition on this relationship, using a sample of 1214 condominium developments in Vancouver, Canada built from 1979-1998. We find that increases in both idiosyncratic and systematic risk lead developers to delay new real estate investments. Empirically, a one-standard deviation increase in the return volatility reduces the probability of investment by 13 percent, equivalent to a 9 percent decline in real prices. Increases in the number of potential competitors located near a project negate the negative relationship between idiosyncratic risk and development. These results support models in which competition erodes option values and provide clear evidence for the real options framework over alternatives such as simple risk aversion. Author Affiliation: (a) Brandeis University, International Business School, 415 South Street, MS 021, Waltham, MA 02454, USA (b) NBER, USA (c) Columbia Business School, Uris Hall 808, 3022 Broadway, NY, NY 10027, USA (d) Sauder School of Business, University of British Columbia, 2053 Main Mall, Vancouver, BC V6T 1Z2, Canada Article History: Received 26 October 2007; Revised 10 March 2008

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jue.2008.09.001 Byline: Christian A.L. Hilber (a)(b), Christopher Mayer (c)(d) Keywords: Capitalization; Elderly; Land supply; School spending Abstract: While residents receive similar benefits from many local government programs, only about one-third of all households have children in public schools. We argue that capitalization of school spending into house prices can encourage even childless residents to support spending on schools. We identify a proxy for the extent of capitalization -- the supply of land available for new development -- and show that towns in Massachusetts with little undeveloped land have larger changes in house prices in response to a plausibly exogenous spending shock. Towns with little available land also spend more on schools. We extend these results using data from school districts in 46 states, showing that per pupil spending is positively related to the percentage of developed land. This positive correlation persists only in districts where the median resident is a homeowner and is stronger in districts with more elderly residents who do not use school services and have a shorter expected duration in their home. Our findings support models in which capitalization encourages the provision of durable local public goods and provides an additional reason why some elderly support local school spending. Author Affiliation: (a) London School of Economics, Department of Geography and Environment, Houghton Street, London WC2A 2AE, UK (b) Spatial Economics Research Centre (SERC), UK (c) Columbia Business School, Uris Hall #808, 3022 Broadway, New York, NY 10027, USA (d) NBER, USA Article History: Received 19 October 2007; Revised 19 September 2008 Article Note: (footnote) [star] We thank an anonymous referee and William Strange, the Editor of the Journal, for valuable comments and suggestions. Gilles Duranton, Harold Elder, William Fischel, Michael Greenstone, Joe Gyourko, Caroline Hoxby, Bob Inman, Loretta Mester, Wallace Oates, Todd Sinai, and seminar participants at the ASSA meetings, the NBER meetings, New York University, the Public Choice meetings, the Wharton School, the London School of Economics, and the Federal Reserve Bank of Philadelphia also provided helpful comments and insights. Any errors, of course, are our own. Financial assistance from the Swiss National Science Foundation, the Max Geldner Foundation, the Zell/Lurie Real Estate Center at Wharton, and the Milstein Center for Real Estate at Columbia Business School is gratefully acknowledged.

An analysis of air traffic congestion at hub airports is presented. The network benefits due to hubbing and consequent additional travel time is compared with that of non-hub flights that operate with minimal additional travel time.

The sale of condominiums in Boston, MA, during the 1990s is studied. Owners do not want to sell their homes at a loss and set the price accordingly.

A model of housing starts, 1975-1994, ties construction to changes in housing prices. The model is applicable to both national and regional data, and includes factors such as: interest rate changes, median months on market for existing stock, and material cost index.

The impact of intergenerational transfers on saving and housing behavior was investigated by analyzing private wealth transfers targeted to first-time home purchases. Newly acquired household-level data from surveys of home buyers conducted by Chicago Title and Trust Co were examined in terms of accumulated savings, transfers received and time needed to save the down payment. Empirical results showed that intergenerational transfers significantly ease the borrowing constraint resulting from the down payment requirement and that transfer recipients reduce the time required to save for the down payment. In addition, transfer recipients increase the value of the home purchased by an amount that is substantially lower than if the transfer were fully leveraged. It was also found that the availability of intergenerational transfers reduces household savings.

Relative returns to selling real estate by auction versus returns selling real estate through negotiated sales are estimated using a new data set from Dallas, TX, and Los Angeles, CA. Results are consistent with a 1994 theory which holds that auctions divest property at a discount, which increases in down markets. Findings also suggest that scattered site auctions sell at a bigger discount than the more homogenous sales of single-site condominiums. Price declines over the course of an auction including single-site auctions were not observed.

The experience of an owner as a seller is determined by his equity position, as shown by the condominium market of Boston, MA, in the early 1990s. A property owner who possesses a high loan-to-value ratio gets a higher price for the property if he opts to sell it, has a higher expected time on the market and sets a higher asking price compared to a proportionately less indebted property owner. This phenomenon among owner-occupants is simply explained by the downpayment requirement for acquirers, not incumbent property owners. The equity-based aggregate theories of the housing market's price volume movements are supported by the said results.

A model that compares the performance of real estate auctions to that of negotiated sales and that addresses unexpected shocks in the number of prospective buyers is developed. Based on this model, it is observed that auction prices, except for those in hot markets, will tend to be lower than prices for houses that undergo negotiated sales. The auction discount decreases, however, once the housing market changes for the better and available units drop in the short term. Auction of houses with lower-range mismatch costs will predictably generate a smaller discount. Because more homogenous units have smaller relative mismatch, their discount will naturally be lower. Finally, comparison of auction prices with market prices for high-cost sellers will raise the auction discount.

There is a positive correlation between tax basis and firm valuation for real estate investment trusts.

Research is presented describing the study of property taxation capping proposals put forward in the state of Massachusetts which would be used to help fund public finance.