Seller-Financing of Homes: A Consumer Economic Perspective

In recent years, the proportion of home purchases financed by lending institutions has declined and the use of alternative financing methods has increased. This paper examines the costs, risks and benefits associated with seller-financing, a popular alternative financing method. The topic is discussed from the perspectives of the buyer and the seller. An empirical analysis is also conducted of condominium sales in Hawaii to gauge the impact of seller-financing upon the housing market as well as its economic effects upon buyers and sellers. Overall, it is concluded that buyers are the primary beneficiaries of seller-financing.     

The Pricing of Interest-Rate Risk: Evidence from the Stock Market

This paper addresses the issue of whether firms are required to pay an ex ante premium to investors for bearing the risk of interest-rate changes. A two-factor APT model with the market and changes in the yield on long-term government bonds as factors is employed. The paper shows that, empirically, most of the interest-sensitive stocks are in the utility industries, and that there is reasonable evidence that the interest factor is priced in the sense of the APT. Several sources for the interest sensitivity are considered, and regulatory lags are focused on as a likely candidate.     

CONSERVED ENERGY SUPPLY CURVES FOR U.S. BUILDINGS

Comparison of nine conservation supply curves for electricity shows that fully implementing a series of energy efficiency measures will result in annual saving of 734 billion kWh (BkWh). This is 45 percent of 1989 U.S. building sector electricity use of 1627 BkWh and represents a $29 billion saving. When translated to units of conserved carbon dioxide (CC CO₂), this annual saving is 514 megatonnes, which is 10 percent of the total 1989 U.S. carbon dioxide (CO₂) emissions from all sources. Implementing additional fuel efficiency measures would result in further potential saving of 5·2 quads of fuel (natural gas and oil) per year, or another 300 megatonnes of CO₂, at a net savings of $20 billion. Fuel switching (replacing electric resistance heat with on-site natural gas combustion) would produce annual saving of another 74 megatonnes of CO₂ at a net saving of $6·8 billion. Thus, total CO₂ saving from these combined efficiency measures are 890 megatonnes at a net saving of $56 billion per year.     

The Net Benefits to Leverage

I estimate the market's valuation of the net benefits to leverage using panel data from 1994 to 2004, identified from market values and betas of a company's debt and equity. The median firm captures net benefits of up to 5.5% of firm value. Small and profitable firms have high optimal leverage ratios, as predicted by theory, but in contrast to existing empirical evidence. Companies are on average slightly underlevered relative to the optimal leverage ratio at refinancing. This result is mainly due to zero leverage firms. I also look at implications for financial policy.