The Gender Gap in Real Estate Sales: Negotiation Skill or Agent Selection?

This study examines differences in net selling price for residential real estate across male and female agents. A sample of 2,020 home sales transactions from Fulton County, Georgia, are analyzed in a two‐stage least squares, geospatial autoregressive corrected, semi‐log hedonic model to test for gender and gender selection effects. Although agent gender seems to play a role in naïve models, its role becomes inconclusive as variables controlling for possible price and time on market expectations of the buyers and sellers are introduced to the models. Clear differences in real estate sales prices, time on market and agent incomes across genders are unlikely due to differences in negotiation performance between genders or the mix of genders in a two‐agent negotiation. The evidence suggests an interesting alternative to agent performance: that buyers and sellers with different reservation price and time on market expectations, such as those selling foreclosure homes, tend to select agents along gender lines.     

Modeling Spatial Variation in Housing Prices: A Variable Interaction Approach

The absolute location of each real estate parcel in an urban housing market has a unique location-value signature. Accessibility indices, distant gradients and locational dummies cannot fully account for the influence of absolute location on the market price of housing because there are an indeterminable number of externalities (local and nonlocal) influencing a given property at a given location. Furthermore, the degree to which externalities affect real estate values is not only unique at each location but highly variable over space. Hence, absolute location must be viewed as interactive with other determinants of housing value. We present an interactive variables approach and test its ability to explain price variations in an urban residential housing market. The statistical evidence suggests that the value of location, as embodied in the selling price of housing units, may not be separable from other determinants of value. It is recommended that housing valuation models, therefore, be specified to allow site, structural and other independent attributes to interact with absolute location—{ x , y } coordinates—when accounting for intraurban variation in the market price of residential housing. This approach is especially useful when estimating the value of housing for geographic areas where very little is known a priori about the neighborhoods or submarkets.     

Chicago's Office Market: Price Indices, Location and Time

Conventional wisdom holds that overbuilding and high vacancy, coupled with curtailed tax benefits, have led to reduced office property values since the late 1980s. Yet assertions that office real estate values fell between the mid-1980s and mid-1990s are not supported everywhere by convincing evidence. This study offers a hedonic analysis of Chicago area office properties that sold from 1986 through 1993. Whereas earlier office market studies generally have been based on rents, this study focuses on variation in actual sale prices (although the prices were not adjusted for financing differences). The transaction-based index estimated here does not support the existence of a nominal office property price level decline beginning in the mid-to-late 1980s. In fact, the results show an upward trend in office property values after 1986, with nominal declines in office market price levels occurring only in the latter portion of the study period.     

Search Benefit in Housing Markets: An Inverted U‐Shaped Price and TOM Relation

The nature of the relationship between a property's selling price and its marketing time in the housing market remains an open question to date, despite almost 40 years of inquiry and hundreds of regressions conducted on various data sources. This study attempts to settle the long‐standing open question by examining the issue from a new perspective. We demonstrate that the true price–TOM relationship should be nonlinear and characterized by an inverted U‐shaped curve wherein the selling price increases with TOM up to a certain threshold, reflective of a positive exposure effect and decreases thereafter to reflect a negative stigma effect. This relationship is borne out in an empirical analysis using a large sample of home sales from the Hampton Roads, Virginia metropolitan area during an extended period of time. We then formulate hypotheses about the benefit of search by home sellers, which are subsequently confirmed by the empirical findings.     

Optimal Selling Mechanism,Auction Discounts and Time on Market

This article examines the optimal selling mechanism problem in real estate market using mean‐variance analysis and downside risk analysis. When sellers can choose between accepting the first offer above a reservation price or auctions (waiting an optimal and fixed time), sellers having higher risk aversion choose auctions and wait a fixed time while sellers having lower risk aversion choose an optimal reservation price and wait a random time. Positive auction discounts are compensated by reduced risks, and there exists a connection between liquidity risk and conditional auction discount. More (Fewer) sellers will choose to sell their houses through auctions in a hot (cold) market or when holding cost increases (decreases). When sellers choose auctions, sellers having higher risk aversion who have lower holding cost wait longer and obtain higher sale price. Loss‐averse sellers unanimously choose the mechanism of setting an optimal reservation price.     

Flooding and Liquidity on the Bayou: The Capitalization of Flood Risk into House Value and Ease‐of‐Sale

The existing literature focuses on how perceived flood risk affects house value. Search theory, however, implies that flood risks will be capitalized into both house price and liquidity. This article draws on search theory to develop an empirical approach for estimating flood risk capitalization into both price and selling time. The results show the mix of price and liquidity capitalization varies by level of flood risk as well as across housing market phases. Regardless of the specific capitalization pattern, the results illustrate that focusing solely on price without allowing for concomitant liquidity capitalization can yield estimates that understate the full impact of flood risk on house transactions.     

Assessing the Performance of Real Estate Auctions

This article investigates the performance of real estate auctions relative to negotiated sales. It uses a repeat-sales methodology to control for unobserved differences in the quality of auction properties. Properties auctioned in Los Angeles during the 1980s boom sold at an estimated discount of 0%–9%, while sales in Dallas following the oil bust obtained discounts of 9%–21%. This evidence is consistent with the theoretical prediction that the auction discount increases in downturns when a seller trades-off a longer expected selling time in a search market against an immediate auction sale. The study finds no evidence of the declining price anomaly.     

Listing Price, Time on Market, and Ultimate Selling Price: Causes and Effects of Listing Price Changes

Information about price changes during a home's marketing period is typically missing from data used to investigate the listing price, selling price, and selling time relationship. This paper incorporates price revision information into the study of this relationship. Using a maximum-likelihood probit model, we examine the determinants of list price changes and find evidence consistent with the theory of pricing behavior under demand uncertainty. Homes most likely to undergo list price changes are those with high initial markups and vacant homes, while homes with unusual features are the least likely to experience a price revision. We also explore the impact of missing price change information on estimating a representative model of house price and market time. Our results suggest that mispricing the home in the initial listing is costly to the seller in both time and money. Homes with large percentage changes in list price take longer to sell and ultimately sell at lower prices.     

Penny auctions

This paper studies penny auctions, a novel auction format in which every bid increases the price by a small amount, but placing a bid is costly. Outcomes of real-life penny auctions are often surprising. Even when selling cash, the seller may obtain revenue that is much higher or lower than its nominal value, and losers in an auction sometimes pay much more than the winner. This paper characterizes all symmetric Markov-perfect equilibria of penny auctions and studies penny auctions’ properties. The results show that a high variance of outcomes is a natural property of the penny auction format and high revenues are inconsistent with rational risk-neutral participants.     

Real Estate Prices During the Roaring Twenties and the Great Depression

Using new data on market‐based transactions we construct real estate price indexes for Manhattan between 1920 and 1939. During the 1920s prices reached their highest level in the third quarter of 1929 before falling by 67% at the end of 1932 and hovering around that value for most of the Great Depression. The value of high‐end properties strongly co‐moved with the stock market between 1929 and 1932. A typical property bought in 1920 would have retained only 56% of its initial value in nominal terms two decades later. An investment in the stock market index (including dividends) would have outperformed an investment in a typical property (including net rental income) by a factor of 5.2 over our time period.     

The Subsequent Market Value of Former REO Properties

In this study, we find the subsequent price for a property initially sold as a real estate owned (REO) property occurs at market prices. The subsequent price to the REO purchaser is related to indicators that the property has been remodeled, renovated, or updated. This suggests that the difference between the price received by servicers/lenders that foreclose and sell a REO property, and the price received by subsequent property owners that sell is in large part due to timely improvements made postforeclosure. Lenders are not selling REO properties at irrational prices, but rather at prices that reflect the condition of the properties.     

Controlling for the Impact of Variable Liquidity in Commercial Real Estate Price Indices

Liquidity in private asset markets is notoriously variable over time. Therefore, indices of changes in market value that are based on asset transaction prices will systematically reflect intertemporal differences in the ease of selling a property. We define and develop a concept of "constant-liquidity value" in the context of a model that is characterized by pro-cyclical volume of trading. We then present an econometric model that allows for estimation of both a standard transaction-based price index and a constant-liquidity index. Our application to the NCREIF database reveals that, in the case of institutional commercial real estate investment, constant-liquidity values tend to lead transaction-based and appraisal-based indices in time, and also to display greater volatility and cycle amplitude. The differences can be significant for strategic investment policy viewed from a mean-variance portfolio optimization perspective.     

Evaluation of a mining project under the joint effect of commodity price and exchange rate uncertainties using real options valuation

Cash flows generated by mining projects tend to be volatile and are extensively influenced by exogenous variables, notably commodity prices and exchange rates. The traditional discounted cash flow (DCF) method, which is normally used for economic feasibility studies and mining project evaluations, presents inconsistencies because the method fails to adequately address uncertainties and operational flexibilities and often ignores certain specific market conditions. Numerous studies have been carried out for mining project evaluations using the real options valuation (ROV) technique for assessing commodity price uncertainty, but there is no research on the combined effects of price and exchange rate uncertainties. Therefore, in order to assess the economic viability of a mining project more accurately, the commodity price and its inherent volatility, the exchange rate and its inherent volatility, and the correlation parameters between them have been incorporated into the model and used in the evaluation process. One of the interesting findings revealed in the study is that project values are overestimated if only commodity price uncertainty is considered in evaluating the project value instead of the joint effect of commodity price and exchange rate uncertainties. This new ROV technique will explore the opportunity to utilize an alternative methodology for approximating project values and to identify valuation opportunities to enhance economic gains or to mitigate economic losses, where the DCF valuation method does not.     

经济评价中“决策油价”确定方法的探讨

原油销售价格是油田开发项目必须及石油石化项目经济评价应采用的重在参数之一,但随着我国与国际原料市场的接轨,近年来原油价格变化非常大,油田开发项目的建设周期又比较长,原油价格常常具有可变性,如何利用该参数进行项目经济评价是摆在我们面前的一个重要课题。引入“决策油价”的概念,并根据对世界的油价史和油价影响因素的分析,结合油介变化动态,确定“决策油价”进行经济评价工作,对冀对进一步开展该类项目的经济评价工作起到参考作用。     

Dark Fiber Valuation

Valuation of dark fiber has recently generated controversy, sparked particularly by the large sums booked for swaps of dark fiber between companies. One of the issues raised is valuation: i.e., what is the value of an asset that generates no revenue now and may do so at some unknown point in the future but only after investment, in an uncertain business climate, and where prices are dropping? The picture is further complicated because the result of investing to bring the asset to market (i.e. lighting the fiber) changes the supply and demand conditions of the market itself and hence invalidates price predictions. A realistic and consistent valuation methodology is necessary for increasingly cautious companies, auditors, and investors. In this paper we describe such a valuation methodology for dark fibre based on real options. Publicly available bandwidth price services start to make this practical by providing market price information. For dark fibre valuation the real option to be valued are the lighting decisions. We specifically include the effect on the market of adding new capacity by using the price-elasticity of demand within the stochastic price process itself, conditional on lighting decisions. Prices are generally volatile and decreasing with time. The evolution of lighting costs and maintenance are included in the valuation. The real options technique used here is novel in that it combines economic and market factors explicitly with mathematical finance to arrive at a valuation and optimal decisions. We found that the optimal lighting riming and capacity decisions to depend on many of the factors included in the analysis with no simple triggers: the details really matter.     

Brand or Variety Choices and Periodic Sales as Substitute Instruments for Monopoly Price Discrimination

We study the puzzle that sellers often employ diverse strategies in terms of carrying multiple brands and holding periodic sales. These two selling tools can be substitute instruments to induce consumer self selection and implement price discrimination. We analyze the factors that affect a seller’s choice between the two pricing instruments and show how different combinations of the two instruments can be optimal under alternative market conditions. A seller may, surprisingly, increase her total number of offers when it becomes more costly to carry brands or hold sales if there are decreasing marginal costs of the alternative selling tool.     

A Contingent Claims Analysis of Price Level-Adjusted Mortgages

This paper examines the performance of alternative mortgage instruments in an environment of stochastic price fluctuations. The two most widely discussed contracts that deal with inflation are the adjustable-rate mortgage (ARM) and the price level-adjusted mortgage (PLAM). The former compensates for inflation by paying the nominal interest rate, which contains a component reflecting the rate of inflation. Nonetheless, even without explicit nominal amortization, this results in real amortization and hence a tilting effect. In addition, the inflation component of the nominal interest rate is shown to reflect only anticipated and not actual inflation, and so the real value of an ARM fluctuates due to unanticipated inflation. A PLAM suffers from none of these defects. To the extent that one is interested in a mortgage whose properties reflect the underlying real environment, the price level-adjusted mortgage is the ideal instrument.     

Duopolistic competition between independent and collaborative business-to-business marketplaces

This paper studies imperfect price competition between two intermediaries in an electronic business-to-business matching market with indirect network externalities. The intermediaries have different ownership structures: an independent incumbent competes with a collaborative buy side consortium to attract buying and selling firms. When firms can register exclusively with one intermediary, the incumbent can deter entry only if the number of consortium owners is sufficiently small. Otherwise, the consortium can enter and monopolize the market. When firms can register with both intermediaries simultaneously, the consortium can always enter and both intermediaries stay in the market with positive profits.     

Broadband business by utilities infrastructure exploitation: A multistage competition model

A promising broadband business opportunity is the exploitation of the physical resources owned by municipalities and utility-based firms. In this study, the new broadband business opportunities owned by these authorities are analyzed through the development of a decision analysis model. The proposed model analyzes the broadband business into stages, integrates real options and game theory and provides business equilibrium in terms of the time of entry in the market, quantity offer and price definition. Finally, a real world case study is discussed showing how the model can be applied.     

The Effects of the Real Estate Crisis on Institutional Stock Prices

This article investigates the contagious movement of financial institutions' common stock prices in response to real estate news. The basic hypothesis is that because real estate assets are traded infrequently, the market has incomplete information about their true value. The stock price reaction by banks, thrifts and insurance companies to announcements of poorly performing real estate portfolios is studied. Consistent with the hypothesis, significantly negative reactions obtain, both within and across industries, to these announcements. Reflecting the differential regulatory environment and disclosure policies, insurance companies, in general, react more strongly to adverse real estate news. Also, the price reaction of an individual firm is significantly associated with the level of its real estate exposure.