The sensitivity of bank stock returns to real estate

According to the Federal Reserve Board, banking firms have recently been shifting significantly larger portions of their loan portfolios into real estate. This increase in real estate lending has caused concern about the continuing economic health of banks on the part of state and federal regulators, since changes in real estate returns, evidenced by changes in property value, can potentially have a significant impact on bank default risk and profit-ability. However, concerned parties do not seem to have explicitly considered the relationship between mortgage default risk and the specific characteristics of real estate investments.This study examines the sensitivities of stock returns for different bank groups, based on the percentage of total loans in real estate and the percentage of loans in five different mortgage categories (construction and development loans, farmland loans, one- to four-family residential loans, multifamily residential loans, and nonresidential and nonfarm loans), to changes in real estate market returns. This is done by developing and using a three-index model.The results of this study indicate that bank stocks, overall, are very sensitive to changes in real estae returns. Banks, with a larger portion of their total loans invested in all types of real estate loans, except farmland loans, are most sensitive to changes in real estate returns.     

Price reversal,transaction costs,and arbitrage profits in the real estate securities market

This paper studies the return reversals of exchange traded real estate securities using an arbitrage portfolio approach. Using the approach, we find that there exist significant return reversals in such securities. These return reversals could be exploited by arbitrage traders if trading costs can be ignored. However, the arbitrage profits disappear after deducting trading costs and taking into account the implicit cost of bid-ask spread. Thus, the real estate securities market is efficient at weekly intervals in the sense that one could not exploit the price reversals via some simple trading rules.     

The persistence of real estate cycles

This paper presents a model that attempts to explain the underlying causes of the prolonged cycles observed in real estate markets. In addition, the paper characterizes the features that make some property types more prone to such boom-and-bust behavior. The combination of demand uncertainty, adjustment costs, and construction lags leads to two phenomena that may help explain market persistence. The first phenomenon is the reluctance of owners to adjust occupancy levels, even in the face of large shifts in renter demand. The second phenomenon is the occurrence of periods of sustained overbuilding: the addition of new supply in the face of already high vacancy rates.     

Pricing Property Index Linked Swaps with Counterparty Default Risk

This paper extends Bjork and Clapham (Journal of Housing Economics 11:418–432, 2002) model for pricing real estate index total return swaps. Our extension considers counterparty default risk within a first passage contingent claims model. We price total return swaps on property indices with different levels of default risk. We develop this model under same assumptions as Bjork and Clapham (Journal of Housing Economics 11:418–432, 2002) and find that total return swap price is no longer zero. Total return swap payer must charge a spread over the market interest rate that compensates him for the exposure to this additional risk. Based on commercial property indices in the UK, we observe that computed spreads are much lower than a sample of quotes obtained from one of the traders in the market.     

Jobs,location, and real estate

The decision to relocate has traditionally been based on job opportunities alone, with no attention paid to the real estate market. The cost of housing, its rate of return, and its specificity to a location do not enter the decision to move or stay. This article develops a more general definition of income, including real estate and labor markets. The null hypothesis is that relocation is based on comparing labor income differentials alone. The alternative is that income is more broadly based, including real estate returns. Estimates are provided in a quantal choice framework.     

Common factors in international securitized real estate markets

This study investigates the presence of common factors in the securitized real estate markets of the Untied States (US), United Kingdom (UK), Hong Kong (HK), and Singapore (SG). Using a combination of factor analysis and canonical correlation analysis on 10-year monthly return data for 142 real estate securities in the four markets, more common risk factors among real estate securities within a country than across countries are detected. In addition, there is at least one common securitized real estate market factor that is moderately correlated with the world real estate market, and to a lesser extent, with the world stock market. However, the degree of linkage across the four securitized real estate markets is much weaker than the strong linkages present across the four economies. It further appears that the extent to which correlations are found in international securitized real estate markets might largely be due to the increasing integrated nature of the world real economy, rather than a result of the globalization of financial markets. The results are preliminary, but indicative, and suggest that more studies exploring how common factors, together with the local market portfolio, could help explain the return-generating process of securitized real estate.     

Bank risk and real estate: An asset pricing perspective

While a number of papers have investigated the time-series behavior ofex post bank stock returns and real estate returns, no study has comprehensively studied the relationship betweenex ante risk premiums on both assetsand the time-varying nature of such premiums in relationship to economic and real estate market conditions. In this study, we investigate how the changing nature of bank risk taking, especially in the real estate market, has affected theex ante pricing of risk in the market for bank stocks. We find that the time variation in bank risk premiums are partly determined by interest rate and real estate market conditions. We also discover that the real estate factor has been important for banks in the 1980s.     

Do specialist funds outperform? Evidence from European non-listed real estate funds

This study aims to determine if specialization led to higher financial performance for European non-listed real estate funds. Funds may either specialize in a particular country and/or property type or manage a broadly diversified portfolio. The findings suggest that after adjusting for relevant performance drivers, both country specialization and country-sector specialization are associated with superior returns while sector specialization is not. The outperformance of country and country-sector specialist funds was particularly pronounced during the recovery and growth period of European real estate markets from 2010 to 2019.     

Residential real estate brokerage as a principal-agent problem

We analyze the terms of the brokerage contract between a house seller and his agent, using the established literature on the principal-agent problem. Considering the influence of moral hazard and adverse selection, we predict a number of features of the contract. Many of these features are not present in observed contracts. To account for this discrepancy, we discuss certain aspects of the real estate market which are not included in the standard principal-agent model but may explain the difference. Standard principal-agent theory neglects important contract design considerations, namely robustness and costs of complexity. In general, the commission contract performs poorly by failing to allocate risk efficiently or to provide agent incentives. It favors established agents and precludes contractual diversity. Finally, we contrast the brokerage contract for real estate with the dealership contract for used cars, but find no compelling answer as to why there are few used house dealers.     

The role of co-skewness in the pricing of real estate

The current study investigates whether systematic skewness offers an alternative perspective as to why the risk-adjusted returns on real estate should be similar to that for stocks. This is not a trivial issue since an affirmative finding implies that we might be incorrectly measuring real estate risk from both a pricing and a portfolio allocation perspective. A multivariate test of the Kraus-Litzenberger model is used to investigate this skewness proposition with the K-L CAPM tested against several alternative versions of the CAPM. The study finds that the Kraus-Litzenberger model offers additional insights into the measurement of real estate risk. Evidence is also found that both the zero beta and the consumption-oriented CAPM hold, which is consistent with the recent literature in real estate.     

Statistical properties of returns: Financial assets versus commercial real estate

This study examines the distribution of commercial real estate returns by region (east, midwest, south, and west), by property type (office, retail, R&D office, and warehouse) and in the aggregate, and compares their distributions to those of financial assets. Nominal and real returns are examined for quarterly, semiannual, and annual periods. The quarterly nominal returns on the financial assets are mostly normal with very little indication of autocorrelation. In contrast, non-normality and autocorrelation are present in most of the nominal quarterly real estate series. The non-normality is greatly reduced when semiannual or annual returns are considered or when the quarterly series are corrected for autocorrelation. The non-normality is also lower for real returns than it is for nominal returns.     

The predictability of real estate returns and market timing

Recent evidence suggests that all asset returns are predictable to some extent with excess returns on real estate relatively easier to forecast. This raises the issue of whether we can successfully exploit this level of predictability using various market timing strategies to realize superior performance over a buy-and-hold strategy. We find that the level of predicability associated with real estate leads to moderate success in market timing, although this is not necessarily the case for the other asset classes examined in general. Besides this, real estate stocks typically have higher trading profits and higher mean risk-adjusted excess returns when compared to small stocks as well as large stocks and bonds even though most real estate stocks are small stocks.     

The market for residential real estate brokerage services: Costs of production and economies of scale

Although the market for real estate brokerage services has been the subject of intense scrutiny for many years, little empirical evidence has been forthcoming regarding the performance of this market. This paper employs a translog cost function to model the underlying production function for the residential real estate brokerage industry. The results indicate that, except for very large firms, modest economies of scale persist throughout almost the entire range of output. Our results also indicate that while average firm size is increasing, many real estate firms are too small to take full advantage of the cost reductions possible with a larger scale of operation. Equally important, large firms do not command a competitive advantage over smaller firms, as fer as unit costs are concerned.     

Risk and return in real estate

Basic information is provided on the returns and risks from 1978 through 1985 for unleveraged equity real estate compared with stocks and bonds. Data sources include the Russell-NCREIF index, the Evaluation Associates index, and the Goldman Sachs equity real estate investment trust index. Findings reveal that the aggregate return for the publicly traded equity real estate investment trust index in nearly twice that of the other real estate series, and more than twice that of the Standard & Poor index. The equity real estate investment trust is far more volatile than the other two real estate series. Neither the Goldman Sachs nor the other two indexes exactly measure the returns or risks on equity real estate. The volatility of the equity real estate investment trust leads it to overstate the risk of this investment category, while the other two indexes are not return indexes. Estimates from this study indicate that real estate risk lies plausibly midway between that of stocks and bonds, in the 9 percent to 13 percent range.     

Buying a house and the decision to use a real estate broker

This study examines the factors that affect the decision by home buyers to use real estate brokers and the subsequent effect this decision has on home prices. Buyers with high opportunity costs and the least amount of information about local market conditions are the most likely to use brokers; a finding consistent with the role of the real estate broker as a market intermediary. Not surprisingly, these were some of the same factors that also have a positive impact on selling price. An important finding of this study is that when selection bias is adequately controlled, the real estate broker has no appreciable, independent impact on selling price. This, in turn, suggests a nonsegmented, highly competitive housing market.     

Franchising and real estate brokerage

This paper examines the value of franchise affiliation to real estate brokerage firms. It uses a national sample to estimate models of brokerage firm sales and revenues. The results suggest that franchisees sell more properties than nonaffiliates, but that the average franchise sale results in less revenue. The net benefit of franchise affiliation is a 9.0 percent increase in net revenue to the average firm. We compare the initial cost of affiliation with the benefits and find that the up-front fees charged by franchisors are substantially lower than the present value of the stream of incremental profits generated by franchise affiliation.     

A Pricing Framework for Real Estate Derivatives

New methods are developed here for pricing the main real estate derivatives — futures and forward contracts, total return swaps, and options. Accounting for the incompleteness of this market, a suitable modelling framework is outlined that can produce exact formulae, assuming that the market price of risk is known. This framework can accommodate econometric properties of real estate indices such as predictability due to autocorrelations. The term structure of the market price of risk is calibrated from futures market prices on the Investment Property Databank index. The evolution of the market price of risk associated with all five futures curves during 2009 is discussed.     

Real estate returns,money and fiscal deficits: Is the real estate market efficient?

This research examines the causal relationship between several financial variables and a portfolio of real estate returns using monthly data from January 1965 to December 1986. The empirical analysis is based on multivariate Granger-causality tests in conjunction with Akaike's final prediction error criterion. The results indicate that measures approximating monetary policy and market returns play an important role in causing changes in real estate returns. In particular, our findings suggest that base money and market returns have had significant lagged effects on current real estate returns.     

德国房地产市场保持平稳的经验

金融危机前后,欧洲多个国家房地产业经历了大起大落,而德国房地产业却保持平稳发展态势,德国房地产业的成功经验值得借鉴。其较高的城市化水平使得各地房产市场发展水平均衡;发达的租赁市场辅助房价稳定;政府更多强调房地产的社会福利性质,并通过健全的法律制度安排,满足各阶层民众的不同层次住房需求。     

房地产市场运行及未来趋势展望

2011年在以限购为主的房地产调控政策作用下,市场需求受到抑制,商品房销售增速明显低于历史同期平均水平。保障性住房全年开工建设任务已经提前完成,受其拉动,房地产开发投资保持高位。当前,保障性住房建设全面展开,以限购为主的调控政策短期不会退出,并呈现向二三线城市扩大的趋势,一些前期房价上涨过快的城市降价促销愈演愈烈,商品房价格回调趋势明显。