The Resale Housing Market

This paper describes and analyzes the structure and operation of the market for existing single-family homes. The paper develops aggregative models of sales and renovation activity based on the adjustment choice decisions of households to alter their housing consumption by moving or by undertaking renovations. The models demonstrate that housing resales and renovation expenditures occur when the present value of the gains associated with a housing adjustment exceeds the costs of the transaction. The choice of the adjustment mode is shown to be significantly influenced by the relative transactions costs of moving versus renovating.     

Forecasting Prices and Excess Returns in the Housing Market

The paper uses quarterly indexes of existing single-family home prices estimated with microdata on properties that sold more than once to estimate excess returns to investment in owner-occupied housing. Housing prices and excess returns are estimated over the period 1970:1 to 1986:3 for Atlanta, Chicago, Dallas, San Francisco. Using time-series cross-section regressions we test for the forecastability of prices and excess returns using a number of independent variables. Price changes in one year tend to continue for more than one year in the same direction. The ratio of construction costs to price, changes in adult population and increases in real per capita income all are positively related to excess returns or price changes over the subsequent year. The results add weight to the argument that the market for single-family homes is inefficient.     

Risk and Return within the Single-Family Housing Market

The trade-off between risk and return in equity markets is well established. This paper examines the existence of the same trade-off in the single-family housing market. That market is dominated by homeowners, who constitute about two-thirds of U.S. households. For them the choice about how much housing and what house to buy is a joint consumption-investment decision. Furthermore, owner-occupied housing is by nature a lumpy investment whose risk cannot be completely diversified. Does this consumption-investment link negate the risk-return trade-off within the single-family housing market? Theory suggests the link still holds. This paper supplies empirical evidence in support of that theoretical result.     

The Inventory–Sales Relationship in the Market for New Single-Family Homes

Time series methods are applied to study monthly inventory and sales dynamics in the U.S. market for new single-family homes. The inventory measure used is the inventory of unsold, new single-family homes, regardless of the stage of construction. Stylized facts regarding inventory, sales, the inventory–sales ratio and the implied series of speculative housing starts are produced. Implications for structural models of housing supply and the relationship of inventory investment in this market to economy-wide inventory investment are considered. Finally, innovation accounting methods are applied to a structural VAR to study the responses of inventories and sales to permanent and transitory shocks.     

Search and Liquidity in Single-Family Housing

A two-stage least squares model of housing prices is estimated with data collected from 3358 single-family home transactions. The results provide evidence for an optimal marketing period and indicate that a liquidity premium is priced in single-family home sales. Consistent with the hypothesis derived from economic search models, the model shows higher selling prices for houses having longer expected marketing periods. The model also shows a price premium for houses that sell faster than expectations. This effect supports the concept that liquidity is a value-enhancing characteristic.     

Impact Fees and the Price of New Housing: An Empirical Study

Development exactions in the form of impact fees are being used increasingly by local governments to fund the cost of providing public services necessitated by growth and development. This paper presents the results of an empirical study designed to ascertain the extent to which impact fees are capitalized into the price of new, single-family dwellings. On June 3, 1974, the city of Dunedin, located in Pinellas County, Florida, began assessing impact fees of $1,150 against all new, single-family construction. Using data on 5,839 new home sales in Dunedin and three other cities in Pinellas County from 1971–1982, it was found that builders were able to pass forward the total cost of impact fees to new home buyers. However, the price differential due to impact fees for new dwellings in Dunedin compared to the price of new dwellings in the other three cities disappeared after approximately six years. This is explained by the nature of the fee structure in Dunedin, adjustments in factor costs, increases in the price of housing in competing cities, and unrealized expectations regarding the benefits to be provided by impact fee collections.     

An Empirical Examination of Traditional Neighborhood Development

This study analyzes the impact of the new urbanism on single-family home prices. Specifically, we explore the price differential that homebuyers pay for houses in new urbanist developments relative to houses in conventional suburban developments. Using data on over 5,000 single-family home sales from 1994 to 1997 in three different neighborhoods, hedonic regression results reveal that consumers pay more for homes in new urbanist communities than those in conventional suburban developments. Further analyses indicate that the price premium is not attributable to differences in improvement age and other housing characteristics.     

Residential Construction Volatility: A Seasonal and Cyclical Inventory Adjustment Analysis

The seasonality of inventories and the seasonality and cyclicality of sales of new single-family residences by speculative builders may be formally introduced into a partial production adjustment inventory model of housing starts. The theoretical results include variables that imply an interaction between seasonality and cyclicality. A specification error bias in the estimation of the partial adjustment coefficient is evaluated for models that exclude the interaction between seasonality and cyclicality. Stabilization policy is more complex when cyclical instability changes season to season. In this view, justification is found for a seasonal stabilization policy in housing.     

Factors Influencing the Value of Urban Land: Evidence from Halifax-Dartmouth, Canada

This study is a hedonic analysis of land values for Halifax-Dartmouth, Canada. The study has demonstrated that conventional, well-known urban explanatory variables such as zoning, lot size, centrality, neighborhood, and so on, found to determine values in the United States also work for a typical Canadian land market. The findings on effects of lot shape, and high traffic (in combination with other than single-family residential zones) is particularly interesting.     

Urban flight: A short-term phenomenon or long-term trend?

We investigate whether the urban flight from more to less dense locations identified by previous housing studies for the early COVID period is a temporary, pandemic-induced phenomenon, or long-term trend. We focus on the period of 2017–2022, 14,961 single-family home transactions from Southwestern Ontario, and three housing market metrics. Our results for sales price in the early pandemic periods are in line with previous studies. However, our results for sales price in the last pandemic phase (2022), marketing time, and visit activity suggest that the urban flight was a temporary phenomenon characteristic of the early COVID phases.     

The Impact of Growth Control Regulations on Housing Prices in California*

This paper examines the impact of growth controls on the price of new single-family homes. Four types of growth controls are discussed and each is found to have a significantly different impact on housing prices. Regulations that are imposed by one locality only are first compared to those that are imposed by a locality whose neighbors also control growth. In California, increases in house prices in communities with only local growth controls cannot be distinguished from communities that do not control growth. However, the 1969 to 1976 housing price increase in growth control jurisdictions located in extensively regulated housing markets is significantly higher than in local-only or no-control jurisdictions. In addition, controls that restrict the rate of development are compared to those that specify the quality of development. In the extensively regulated San Francisco Bay area, the 1969 to 1976 housing price increase was 35% higher in rate-controlled communities and 20% higher in quality-controlled communities than in no-control communities.     

Avoiding Both Disinvestment and Speculation in Private Multifamily Housing

Maintaining the health of existing urban neighborhoods requires a radically different approach from that of simply intervening with recently developed housing tools such as Urban Renewal, FHA mortgages, FAIR plan insurance, HUD subsidized loans and the like. Instead, the dynamics of healthy and pathological neighborhoods must be more closely examined so the workings of the prevailing system can be identified. Housing policy has largely been formulated on the concept of housing "filtering or trickling down" while people move up, but this theory frequently fails to fit the facts.
Neighborhood change and response to interventions often seem unpredictable. A new theory based on the inherent strength of existing stable urban neighborhoods to stave off forces that lead to disinvestment on the one hand, and speculation on the other, would be more useful than one that accepts deterioration and obsolescence as inevitable. This paper seeks to contribute to such a theory. While the data presented here are drawn from research in multi-family housing, many of the inferences apply to single-family housing as well.     

Reaction of House Prices to a New Rapid Transit Line: Chicago's Midway Line, 1983–1999

This study examines the effect of the new rapid transit line from downtown Chicago to Midway Airport on single-family house prices before and after the opening of the line. The results show that the housing market anticipated the opening of the line. House prices were being affected by proximity to the stations in the late 1980s and early 1990s—after the plans for the line were well known. The difference between the increase in the value of homes within the sample area as compared with properties farther away from the new transit stations was approximately $216 million between 1986 and 1999.     

Alternative Mortgage Instruments, Qualification Constraints and the Demand for Housing: An Empirical Analysis

Government-guaranteed mortgage loans (GFRMs) and adjustable-rate mortgages (ARMs) were introduced to make payment to income (PTI) and loan-to-value (LTV) qualification conventions less restrictive. This paper analyzes the effect of GFRMs and ARMs on the demand for housing. Using a large national data set for the 1988 to 1989 period, we employ a two-stage procedure to estimate housing demand. In the first stage, a multinomial logit model estimates the probability of choosing an FRM, ARM or GFRM. Predicted values from the logit are used to construct user costs and estimate housing demand. Using the model estimates, we simulate demand under four different mortgage availability regimes: FRM, FRM and GFRM, FRM and ARM and all three. These simulations indicate that GFRMs, by relaxing LTV constraints, increase housing demand by approximately 6.2% relative to the FRM regime; the addition of ARMs, by relaxing both PTI and LTV constraints, raises demand by an additional 6%, for a total of 12.2% with inclusion of all alternatives.     

The Cost of Foreclosure Delay

We measure the cost of foreclosure delay by estimating time‐related foreclosure costs using a large national sample of residential mortgages before, during, and after the recent U.S. housing crisis. The large volume of foreclosures, coupled with an unprecedented series of government interventions in mortgage servicing practices, significantly extended foreclosure timelines during and after the crisis.  Costs were especially pronounced in judicial review states, which saw average foreclosure costs go up 15 percentage points, 24 percentage points in the highest cost state.  Cost increases of this magnitude are likely to have consequences for servicing practices and mortgage credit availability.     

Equity and Nonequity Determinants of FHA Single-Family Mortgage Foreclosures in the 1980s

We examine foreclosures on FHA single-family mortgages insured during the 1975–87 period. The importance of the market value of borrower equity and national house price dispersion support much earlier work emphasizing the key role of negative equity in triggering default. The lower is "mean" market-value equity, and the greater is dispersion, the greater is the fraction of borrowers likely to have negative equity. The unemployment rate and the book value of borrower equity are also shown to be significant determinants of default. Unemployment is one of those events that can force borrowers to move. The moving decision increases the likelihood of default because moving costs no longer deter default, and the costs of selling the house reduce the effective equity in the house. The book value of equity is relevant to this decision because it is what the sellers receive if they move without defaulting. Not only are both of these variables significant determinants of default, but the smaller is book equity, the greater is employment impact (with large book equity, unemployment should not matter because selling the house is preferred to default).     

Housing Adjustment Costs: Their Impact on Mobility and Housing Demand Elasticities

The role of housing adjustment costs in influencing mobility decisions, and the relationship between these and housing demands is not well understood. Here we try to examine how changes in adjustment costs as well as in such demand factors as income, influence the decision of households to adjust their housing consumption through moving. Empirically, we use a sample of recently moving homeowners from the PSID and provide evidence indicating adjustment costs are more important than other demand factors in influencing mobility decisions. We also argue that sample selection may bias estimates of housing demand elasticities when the sample is restricted to recent movers because the influence of adjustment costs in the mobility decision are not accounted for. Testing for this using the Heckman two-stage procedure, however, showed this was not a significant problem.     

Rates of Return on GNMA Securities: The Cost of Mortgage Funds

This paper examines rates of return earned on GNMA securities over the period January 1971 through June 1978. We find that over this period the mean monthly return on GNMAs was greater than the mean return on long-term government bonds and slightly greater than the mean return on high-grade corporate bonds. However, in neither case was the difference statistically significant. Thus, based on this evidence, it is not possible to conclude that the cost of acquiring funds to finance single-family housing purchases through the GNMA program exceeded the cost of acquiring funds by the U.S. treasury or financially-strong corporations.     

Housing Costs and the Elderly

Estimates are made of changes in average housing costs and average family incomes for non-moving elderly homeowners and renters over the period 1972–80. Findings suggest that: rental costs are higher in each time period than are homeownership costs; evidence of serious deterioration in affordability of housing is weak, when looking at aggregate price/income ratios; and it is clear that elderly renters are more seriously disadvantaged in housing affordability than are elderly homeowners at every time period.     

Nature of comovements in US state and MSA housing prices

This study analyzes the time-varying nature and determinants of comovements in US housing prices using state and metropolitan statistical area (MSA) data. We employ dynamic factor models with time-varying loadings and stochastic volatility (DFM-TV-SV) to estimate the national, regional, and state factors. The time-varying factor loadings and stochastic volatility features enrich the dynamic factor model structures and are an effective tool to examine the comovements in housing prices. We find that the national factor is the dominant factor in explaining the movement of housing prices. The national factor accounts for 79% of the variation in state-level housing prices on average, with the greatest magnitude occurring during the housing boom and bust periods in many regions and states. We also find that the factors and synchronization effects are time-varying and heterogeneous across regions. The state-level housing prices contain higher national housing factor components in states with more diverse economies, higher wages and house prices, and lower unemployment rates. These findings shed light on the effectiveness of residential real estate diversification across the United States and the potential for elevated national housing risk amid economic downturns due to increased national housing price integration.