Cash and Distressed House Sales Price Discounts: Dual Sample Selection Spatial Interdependence Approaches

Beginning with a hedonic price model, and then progressing to a method accounting for dual sample selectivity biases and spatial interdependence; we document (and correct for) these potential confounding biases, and produce price counterfactuals for (1) all-cash financed property, (2) distressed property, and (3) all-cash and distressed property transactions. Results provide evidence of self- selection biases with all-cash purchasers, distressed properties, and distressed and all-cash properties. Significant disparities in observed cash (?13% and ?6.5%) and distressed property discounts (?1% and ?6%) are documented in pre-and post-recessionary environments, Further, cash discounts are consistent for non-distressed transactions (?11%) during both periods; however cash discounts associated with non-distressed transactions are significantly reduced post-recession (?23.3% to ?3.7%. This attenuation is attributed to a significant increase in the relative frequency of cash purchased distressed properties post-recession, i.e., larger percentage of cash buyers. Sub-sample counterfactual tests confirm prior results, and expand our understanding of all-cash and distressed discount determinants. These results provide insight into observed time variant all-cash, and distressed property discount affect sizes.     

Optimal Portfolio Choices, House Risk Hedging and the Pricing of Forward House Transactions

This paper develops a utility indifference model for evaluating various prices associated with forward transactions in the housing market, based on the equivalent principle of expected wealth utility derived from the forward and spot real estate markets. Our model results show that forward transactions in the housing market are probably not due to house sellers?? and buyers?? heterogeneity, but to their demand for hedging against house price risk. When the imperfections of real estate markets and the risk preferences of market participants are taken into consideration, we are able to show that the idiosyncratic risk premium, which mainly depends on the participants?? risk preferences and the correlation between the traded asset and the real estate, is a remarkable determinant of house sellers?? and buyers?? forward reservation prices. In addition, we also find that the market clearing forward price usually will not converge toward the expected risk-neutral forward price. The sellers?? or buyers?? risk aversion degrees and market powers are also identified to play crucial roles in determining the clearing forward price.     

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.     

Do REITs use cash reserves efficiently? Evidence from corporate acquisitions

We examine the combined impact of corporate governance and excess cash holdings on the propensity of firms to become bidders and engage in value destroying acquisitions. We focus on the REIT market, due to its unique characteristics caused by regulation and the nature of the industry. The lack of active real estate takeover market should lead to entrenchment and exacerbate agency costs. However, given the mandatory high cash payout for REITs, the absence of takeover market should not cause concerns to shareholders. Our analyses reveal that unlike conventional firms, cash-rich REITs are not more likely to become acquirers and acquisitions by cash-rich REITs are not value decreasing. However, similarly to industrial firms, REITs with higher excess cash and lower insider ownership are more likely to become bidders. We interpret our results to be consistent with the hypothesis that agency problems are less severe in real estate and investors are not averse to use of excess cash by REIT managers on intra-industry acquisitions.     

Government real estate interventions and the stock market

We study the spillover of government interventions in the real estate market to the stock market. We find that the more active mutual funds decreased ownership in equities with no short-term reversal. Furthermore, they increased ownership in the finance sector stocks without significant changes to their real estate equity holdings. The interventions affecting the riskiness of the finance sector stocks triggered a larger trading response than the ones focused on the real estate sector stocks’ cash flows. Overall, the spillover of the housing market shocks to the stock market seems to be materialized mostly through the discount rate channel.     

中国房地产价格的泡沫检验和空间联动分析

本文利用Pesaran提出的面板数据处理方法分析中国1996-2006年房地产价格,发现房地产价格和居民收入之间存在协整关系,但房价上涨速度快于居民收入增长速度,房地产市场具有"理性泡沫"特征。进一步的分析表明,城市化进程和空间扩散是短期内导致房价波动的两个重要因素,而利率的影响不显著。     

ANOMALOUS BIDDING IN SHORT‐TERM TREASURY BILL AUCTIONS*

We show that Treasury bill auction procedures create classes of price‐equivalent discount rates for bills with less than 72 days to maturity. We argue that it is inefficient for market participants to bid at a discount rate that is not the minimum rate in its class. The inefficiency of bidding at other than the minimum rate is related to a quantity shortfall rather than an unexploited profit opportunity. Auction results for weekly offerings of four‐week bills and occasional offerings of cash management bills show that market participants frequently bid at inefficient rates. However, they are more likely to bid at efficient rates than chance would suggest.     

Net Asset Value Discounts for Asian-Pacific Real Estate Companies: Long-Run Relationships and Short-Term Dynamics

This study investigates the time series behavior of real estate company net asset value discount/premium (NAVDISC) in eight Asian-Pacific securitized real estate markets from 1995 to 2003. We postulate that if there is a stable NAVDISC for real estate companies in the long-run, then there should be a long-run cointegrating relation between their stock prices (Ps) and net asset values (NAVs). Employing panel data cointegration econometrics that comprises three approaches; panel unit root test, heterogeneous panel cointegration test and dynamic panel error-correction modeling (ECM), we find that long run NAVDISCs persist in individual Asian-Pacific securitized real estate markets and the regional market. All the NAVDISCs exhibit mean reversion and that the respective disequilibrium errors fluctuate around the mean values. Moreover, NAV is an important factor that statistically explains the price variations in real estate stock prices regardless of their speed of mean-reversion in the NAV discount /premium.     

Search Costs,Behavioral Biases,and Information Intermediary Effects

In many markets, buyers, sellers, and their agents have differential information about the quality of heterogeneous assets. We study negotiated transaction prices in the commercial real estate market, which is characterized by heterogeneous assets, illiquidity, and highly segmented local markets, all of which increase the importance of asymmetric information in negotiated pricing outcomes. Using 114,588 industrial, multi-family and office sale transactions that occurred during 1997–2011, we document that distant commercial real estate buyers pay, on average, premiums of 4 % to 15 % relative to local buyers, controlling for individual property characteristics as well as time fixed-effects. We also examine the extent to which the sources of these observed premiums are a product of higher search costs/information asymmetry problems associated with distance (search cost channel) or a result of reference-dependence preference/anchoring based on the price levels in the investors’ local market (behavioral biases channel). Our results suggest the observed price premiums are explained by distant investors who face higher search costs and are at an information disadvantage compared to investors located in closer proximity to the property. In contrast, anchoring plays a more muted role in explaining observed premiums. The use of an intermediary (broker) increases, on average, the acquisition prices of buyers and decreases the disposition prices of sellers by 3 % to 8 %. This result is consistent with the incentive real estate agents have to convince sellers to dispose of their properties too quickly and to convince buyers to search less and therefore pay higher prices.     

The Impact of Mispricing and Asymmetric Information on the Price Discount of Private Placements of Common Stock

The price discount on privately placed stock is large and can vary substantially among firms. While earlier studies attribute price discounts on privately placed stock to illiquidity and costs of gathering information, we offer a more complete explanation. We find that firms exhibiting higher overvaluation have significantly larger price discounts in private stock sales. We also find that higher levels of asymmetric information about the issuing firm and about the stock market environment at the time of the private placement cause more pronounced discounts in the offer price. Our analysis also shows that post-issue abnormal returns following private placements are higher when discounts are less pronounced.     

The Impact of Property Condition Disclosure Laws on Housing Prices: Evidence from an Event Study Using Propensity Scores

We examine the impact of seller??s Property Condition Disclosure Laws on residential real estate values. A disclosure law may address the information asymmetry in housing transactions shifting risk from buyers and brokers to the sellers and raising housing prices as a result. We combine propensity score techniques from the treatment effects literature with a traditional event study approach. We assemble a unique set of economic and institutional attributes for a quarterly panel of 291 US Metropolitan Statistical Areas (MSAs) across 50 US States spanning 21?years from 1984 to 2004. The study finds that the average sales price of houses in a metropolitan area increases by an additional 3 to 4% over a 4?year period if the state adopts a Property Condition Disclosure Law, which is consistent with approximately a 19 basis point or 6.4% reduction in the risk premium associated with purchasing owner-occupied housing. When we compare the results from parametric and semi-parametric (propensity score) event analyses, we find that the semi-parametric analysis generates moderately larger estimated effects of the law on housing prices.     

Foreclosure,REO, and Market Sales in Residential Real Estate

Assessment of lender and third-party bidder acquired properties at foreclosure auction is provided. Properties acquired at foreclosure auction by third-party bidders transact at a discount to lender dispositions of real estate owned (REO) properties. The discount reflects a reduction in costs associated with lender owned (REO) dispositions and uncertainty faced by third-party bidders. Moreover, there is a ranking in transaction prices among initial purchases by third-party bidders at foreclosure auction, REO sales, non-distressed property sales and the subsequent sales of third-party bidder acquired properties. Third-party bidder auction prices are below REO sale prices, which are below non-distressed property sale prices, which are below the subsequent sale prices of third-party bidder acquired properties. The price spacing by cohort is logical, intuitive and economically justified in a market with rational participants. Implications are also apparent for the measurement of price changes, net sale proceeds and returns to residential real estate.     

Valuing and pricing IPOs

This paper investigates how underwriters set the IPO firm’s fair value, an ex-ante estimate of the market value, using a unique dataset of 228 reports from French underwriters. These reports are issued before the IPO shares start trading on the stock market and detail how underwriters determined fair value. We document that underwriters often employ multiples valuation, dividend discount models and discounted cash flow (DCF) analysis to determine fair value but that all of these valuation methods suffer from a positive bias with respect to equilibrium market value. We also analyze how this fair value estimate is subsequently used as a basis for IPO pricing. We report that underwriters deliberately discount the fair value estimate when setting the preliminary offer price. Part of the intentional price discount can be recovered by higher price updates. We find that, controlling for other factors such as investor demand, part of underpricing stems from this intentional price discount.     

Green Buildings: Similar to Other Premium Buildings?

The statistics, finance, and real estate literature regularly rely on propensity score matching techniques to balance samples of data where randomized treatment assignment is not possible. In the sustainable commercial real estate literature the technique has seen substantive use. To analyze price and rent premiums for green buildings, several studies have used propensity scores to ensure samples that contains eco-labeled and un-labeled buildings reflect a randomized assignment of the treatment. Underpinning the argument for the use of propensity scores is the notion that green buildings contain similar attributes to non-green buildings. However, if the green labels were ignored, would premium buildings be otherwise statistically similar to premium buildings in the market? Here, we analyze a research question focusing on the extent to which propensity scores can predict a green building using the standard building attributes and whether propensity scoring is an econometric necessity?     

An Empirical Evaluation of the Usefulness of Non-GAAP Accounting Measures in the Real Estate Investment Trust Industry

We conduct three sets of analyses to compare the usefulness of net income, based on generally accepted accounting principals (GAAP), and the industry-advanced funds from operations (FFO) in the context of the real estate investment trust (REIT) industry. In our first set of tests, we find that FFO is more strongly associated with one-year ahead FFO and one-year ahead operating cash flows than is net income. Conversely, we find that net income explains more variation in one-year ahead net income and current stock price than does FFO. Second, in support of the claim that some REITs manipulate FFO, we document that young REITs and REITs that are likely to access capital markets are more likely to manage FFO. Third, we find that, for a sample of firms that disclose current value information, both net income and FFO fail to reflect holding gains or losses on unsold properties in a timely manner. Overall, our analyses suggest that the REIT industry's claim that FFO is more useful than net income is premature because the superiority of one measure over the other is highly contextual.     

Distortions in Real Estate Transactions with Out-of-State Participants

Using the MLS and the land registration data from Indiana, this paper identifies and explains price distortions associated with out-of-state sellers and buyers in the housing market. We find that out-of-state buyers pay 20.4% higher prices than local buyers, and the premium is fully explained by the former purchasing larger homes than the latter. On the other hand, out-of-state sellers receive a 21.2% price discount, among which 9.3% is attributable to differences in transactional characteristics, 3.2% is explained by increased motivation and weak bargaining power of out-of-state sellers, and 1.5% is due to differences in agent characteristics and behaviours. The remaining 7.2% discount varies systematically with the informational disadvantage of out-of-state sellers, and with the market condition. Our results are robust to model misspecification.     

The Effect of Demand for Shares on the Timing and Underpricing of Seasoned Equity Offers

Despite high levels of asymmetry of information, firms that issue seasoned equity offerings (SEOs) within a year of their initial public offering (IPO) (follow‐on SEOs) are able to offer shares at a lower discount as compared to more mature firms. We provide evidence that this seeming contradiction can be explained by a very high degree of demand for the follow‐on offering. We find that the likelihood of issuing a follow‐on SEO is significantly related to the level of institutional demand and that discounts are lower for follow‐on SEOs in which institutional demand is high. We also consider the joint effect of cash holdings and follow‐on SEOs on discounts since firms that have recently gone public tend to hold high levels of cash. Underpricing is higher for firms with elevated preoffer levels of cash, which is consistent with market timing predictions. However, this relation is mitigated for both follow‐on SEOs and issues that also have high share demand.     

Does buyer heterogeneity steepen or flatten quantity discounts?

This article argues that as the distribution of a firm's buyers becomes more heterogeneous, the firm's profit‐maximizing quantity‐discount schedule becomes less steep. First, we note that one measure of heterogeneity is the slope of the hazard function, expressed in terms of a simple crossing condition. We then show that marginal price schedules, for distributions of buyers which are more heterogeneous by this measure, are less negatively sloped in that they cross schedules for more homogeneous distributions from below. Intuitively, quantity discounts are a response to an individual buyer's declining marginal utilities, and buyer heterogeneity interferes with this response.     

The Relationships between Real Estate Price and Expected Financial Asset Risk and Return: Theory and Empirical Evidence

In pricing real estate with indifference pricing approach, market incompleteness is shown to significantly alter the conventional pricing relationships between real estate and financial asset. Specifically, we focus on the pricing implication of market comovement because comovement tends to be stronger in financial crisis when investors are especially sensitive to price declines. We find that real estate price increases with expected financial asset return but only in weak market comovement (i.e., a normal market environment) when investors enjoy diversification benefit. When market comovement is strong, real estate price strictly declines with expected financial asset return. More importantly, contrary to the conventional positive relationship from real option studies, real estate price generally declines with expected financial asset risk. With realistic market parameters, we show that there is a nonlinear relationship between real estate price and financial risk. When the market comovement is strong, real estate price only increases with financial asset risk when the risk is low but eventually declines with the risk when it becomes high. Our cross-country empirical results also show that the relationship between financial market risk and real estate price is non-monotonic, conditional on the degree of market comovement.     

对个人住房开征物业税的几个判断及效应预测

对个人住房开征物业税是关乎国计民生的大事。本文认为,开征物业税之前需要进一步理顺中央与地方的财政关系;开征后的物业税收入要用于满足地方公共财政支出的需要;物业税开征后的征管质量取决于对个人住房信息的掌握和政府各部门间的横向合作。物业税开征与地区房地产价格弱相关,与全国房地产价格无关;与股市题材炒作相关,与资本市场发育无关;与当地居民收入和福利相关,与辖区外居民效用无关。