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Wharton News
"Philadelphia’s Decline Not Necessarily Fatal" Says Professor Gyourko in Philadelphia InquirerIn growing cities most houses are valued at more than the cost of new construction but in Philadelphia about 60 percent of all single-family dwellings in 1990 could be bought for less than it cost to put up new ones. And 30 percent of all city homes were valued at 70 percent or less of their replacement cost. In a paper that Gyourko wrote last year with Harvard economist Edward Glaeser (Working Paper #382), Gyourko points out that as the demand for row houses declined, city houses dropped in value and therefore attracted disproportionately low-skilled, low-income residents - growth and decline helping to separate the upwardly mobile from the poor and less-skilled. "Cities decline very, very slowly," says Gyourko. In fact, a case can be made that Philadelphia today is still responding to changes that took place in the early postwar years. However, the decline is not irreversible. In Boston, 75 percent of the houses were worth less than the cost of new construction in 1980; by 1990 that proportion had dropped to 4 percent. "It is not the case that once you start going down, you go down forever," he said. "But you can decline for a very long time."
Opportunity Fund Analysis by Professor Linneman Featured in Inman NewsThe study (available on the Zell/Lurie Website Home Page) co-authored by Wharton Real Estate Professor Peter Linneman and Stan Ross of the Lusk Center demonstrates a need for greater transparency and consistent standards across funds and sponsors. The Inman News Feature (4/18/02) quotes Professor Linneman on performance standards of opportunity funds. "Funds are only as good as their sponsors. It is much easier for most sponsors to demonstrate an ability to invest than an ability to successfully return capital and profits to investors." The study suggests that a task force representing the major opportunity funds be created to develop reporting and performance standards for the industry. "If funds expect to play a large role in shaping their future, they must take the initiative in meeting investor expectations. If not, their future could be determined by investors who are pressing for changes in the industry’s reporting practices."
Professor Poindexter to Speak at John Marshall Law SchoolGeorgette C. Poindexter, Wharton Professor of Real Estate and Legal Studies, has been invited to deliver the 2002 Robert Kravotil Memorial Lecture in Real Estate Law at The John Marshall Law School in Chicago. The lecture, Analyzing Real Estate Loan Defaults in the Era of Securitization, is scheduled for May 23rd.
Report on Study of GNMA Choice, by Real Estate Professor Susan WachterA recent Asset Securitization Report released by the Mortgage Bankers Association of America refers to a study written by Wharton Real Estate Professor, Susan Wachter. The study spotlights GNMA Choice - a proposal to allow, for the first time, the Government National Mortgage Association (GNMA) to securitize conventional mortgages. The program would qualify borrowers using conventional underwriting standards, and be administered jointly through private mortgage insurance companies and the Department of Housing and Urban Development (HUD). Private mortgage insurance would be placed on all mortgages securitized through GNMA Choice. Professor Wachter called the GMAC proposal "a poor public policy" and said that the proposal would cost taxpayers $1.9 billion over ten years. "The proposal may provide benefits to private mortgage insurers and some lenders, but likely will do so at the cost of reducing long-term homeownership opportunities for underserved populations."
Professor Wachter - Conference PanelistThe National Association of Realtors has invited Professor Susan Wachter to serve as a panelist at their May Conference in Washington, DC. The two panels that will feature Professor Wachter address residential real estate business trends and also the Ginnie Mae Choice proposal (see above).
Flight Delays - Airport Capacity Not Necessarily the ProblemKnowledge @Wharton recently included an article on a research paper by Wharton Real Estate Professors Chris Mayer and Todd Sinai. The paper, Network Effects, Congestion Externalities, and Air Traffic Delays: Or Why All Delays Are Not Evil (Working Paper #393) examines US Department of Transportation data on airport congestion. Sinai comments that "the prevailing thought on the delays is that there is only so much capacity and every carrier is vying for runway space." However, Mayer and Sinai offer an alternative explanation. An airline using an airport as a hub and operating flight routes to outlying cities has to offer as many connections as possible for people going in and out of the hub airport. "You have to bunch flights together to allow people relatively short connecting times with a large number of destinations," says Mayer. "Hubbing" acts as the main contributor to delays overall. Public policy initiatives that ignore the reason behind the hubs’ contribution to delays could create an air traffic system less tuned to consumers. The paper supports increasing airport capacity as a way to improve efficiency but cautions that as the federal government builds additional runways, the hub airlines will increase their number of flights. Consumers will have more choice of where to fly but still have to cool their heels at the airport.
ULI Visit to CampusThe Zell/Lurie Real Estate Center hosted an Urban Land Institute/ Select Leaders presentation on campus in April. Students were introduced to the benefits of ULI Membership and the SelectLeaders Graduate Center, the first real estate job- site to offer university students access to jobs and intern opportunities across all sectors of the real estate industry. Nicholas Brown, Terry Ann Hearn and Anthony LoPinto represented ULI/Select Leaders. More than 20 Real Estate Club members attended.
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