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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.

A method based on economic theory for appraising the state of house prices, including bubbles and parameters contributing to housing demand, is advanced and discussed. Four erroneous beliefs pertaining to the costliness of the housing market are rectified.

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.

This paper examines the contribution of out-of-town second-house buyers to mispricing in the housing market. We show that demand from out-of-town second-house buyers during the mid 2000s predicted not only house-price appreciation rates but also impliedto- actual-rent-ratio appreciation rates, a proxy for mispricing. We then apply a novel identification strategy to address the issue of reverse causality. We give supporting evidence that out-of-town second-house buyers behaved like misinformed speculators, earning lower capital gains (misinformed) and consuming smaller dividends (speculators). [ABSTRACT FROM AUTHOR]

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 of house price appreciation in the Boston area is used to determine important characteristics that influence housing and land rates. Between 1982 and 1992, the price changes throughout cities and towns are affected by employment conditions, nearness to the town, quality of educational institutions and number of housing facilities. This finding correlates with standard urban models wherein towns have permanent local facilities.

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.

For decades, it was taken as a given that an increased homeownership rate was a desirable goal. But after the financial crises and Great Recession, in which roughly eight million homes were foreclosed on and about $7 trillion in home equity was erased, economists and policymakers are re-evaluating the role of homeownership in the American Dream. Many question whether the American Dream should really include homeownership or instead focus more on other aspects of upward mobility, and most acknowledge that homeownership is not for everyone. We take a detailed look at US homeownership from three different perspectives: 1) an international perspective, comparing US homeownership rates with those of other nations; 2) a demographic perspective, examining the correlation between changes in the US homeownership rate between 1985 and 2015 and factors like age, race/ethnicity, education, family status, and income; 3) and, a financial benefits perspective, using national data since 2002 to calculate the internal rate of return to homeownership compared to alternative investments. Our overall conclusion: homeownership is a valuable institution. While two decades of policies in the 1990s and early 2000s may have put too much faith in the benefits of homeownership, the pendulum seems to have swung too far the other way, and many now may have too little faith in homeownership as part of the American Dream. [ABSTRACT FROM AUTHOR]

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.

Research describing the relationship between residential construction and the regulation of land use is presented. It is shown that regulations significantly impact upon the amount and duration of construction.

This paper argues that the U.S. mortgage debacle must be analyzed in the broader setting of global real estate markets. Recent U.S. home price growth closely tracked increases in other developed economies. The analysis distinguishes among market regions in terms of supply elasticity and localized transactions-costs. A series of user-cost models are presented which imply that interest rate fluctuations must figure prominently in any explanation of movements in price/rent ratios. National factors such as the expansion of subprime credit must also be accounted for. The paper concludes with policy prescriptions addressing rapid price declines and elevated interestrate spreads. We argue that the federal government should play a leading role in helping to reduce interest rates on new mortgages and cushion against underwriting losses on the existing balance sheets of lenders. [ABSTRACT FROM AUTHOR]

Presents a commentary on papers written by James Orr and Richard Peach and Joseph Gyourko and Joseph Tracy with focus on issues related to home ownership. Discussion of the findings; Analysis of the results; Policies to encourage home ownership; Conclusion.