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Wharton News
Real Estate Professor Chris Mayer interviewed for CNBCWharton Real Estate Professor Chris Mayer discussed possible signs of a bubble in the housing market in an interview for CNBC. Click here to view the interview.
Reducing the "Hit" from CommissionsBrokers get a percentage of whatever you make when you sell your house and therefore they have an incentive to get you a high price. But they have an even greater incentive to sell your house quickly. "The longer it takes to sell, the more time brokers have to spend showing the property and the more money they have to spend on direct advertising of the property," notes Professor Chris Mayer in an article in the Wall Street Journal (11/20/02). For instance, if you are patient when selling your home and hold out for a higher price, you might snag an extra $25,000. After subtracting a 6% commission, that is an additional $23,500 in your pocket. But for the selling broker, your stubbornness could mean months of additional work, but only $375 in extra commission.
Data Suggests No Slowing in Housing Market says Mayer in the Wall Street JournalAn article in the Wall Street Journal (1/22/03) reported that in December there was an 8.2% jump in the number of permits issued by authorities to builders to begin new projects. This is considered a leading indicator of future activity and can also mean that homebuilders are getting ahead of themselves, putting up new homes they might be unable to sell in the months ahead if buying slows. But Professor Chris Mayer doesn't believe that this is the case. He notes that at the sales rates that prevailed in late 2002, it would take builders less than four months to sell the stock of new homes they had built, a low level of unsold inventory. Builders "don't start units unless their sales more or less justify it," Mayer said.
Mayer Presents Research in Washington DCProfessor Mayer presented two research papers at the American Real Estate and Urban Economics Association and the American Finance Association meetings in early January in Washington DC. The papers were entitled What can we learn about (REIT) investment and capital structure from a better measure of q? and The effects of share price versus ‘fundamental value’ on REIT stock issuances and share repurchases.
Wharton Alumni Magazine Fall Edition Focuses on Professor Susan WachterIn a front page interview given to the Wharton Alumni Magazine on Urban Perspective (Fall Ed.), Wharton Real Estate Professor Susan Wachter spoke optimistically on the future of cities. "It's clear that there is the potential for new investment in cities. There are continuing advantages to the clustering of firms in cities especially in knowledge-based sectors and other fields where in-person contact is key. Infrastructure, culture, commercial real estate, both public and private, are heavily concentrated in cities. I do not think cities in the future will decline absolutely in population, although they undoubtedly will relative to the suburbs. In fact, recent trends point to urban recovery. I don't think cities have been dying a natural death. If so, we'd see cities dying across the world," she says. "The global urban problem is too much growth. In the United States, there are particular processes at play weakening cities. The processes are self-generating. As the middle class leave cities, the tax base decreases, and taxes go up. Unfortunately national housing policy has also contributed to the exit of the middle class and cities' decline. But this can be reversed."
Productive Winter for Professor Susan WachterProfessor Wachter began a busy schedule in November by presenting a paper, co-authored by Richard Herring, "Bubbles in Real Estate Markets" at the Fannie Mae Research Seminar in Washington D.C. She then participated in The National Housing Conference Senior Executive Roundtable on "Bridging the Affordability Gap" in the United States Housing Market. In Philadelphia she gave a workshop on "Private Infrastructure Threat, Risk, and Response" at the HomeFront Greater Philadelphia Conference on Homeland Security, sponsored by the Philadelphia Chamber of Commerce and on November 21 she spoke on "Urban Success Measures" at the Home Ownership Resources and Strategies Summit in Washington D.C. Professor Wachter returned to Washington in January to present two papers at the Allied Social Science Associations’ Meeting, "Financial Barriers to Homeownership: The Roles of Income, Wealth, and Credit Constraints" co-authored with Irina Barakova, Raphael W. Bostic, and Paul Calem. And "The Neighborhood Distribution of Subprime Lending Decisions," co authored with Paul Calem and Kevin Gillen.
For Lower-Income Buyers, a Surge in HomeownershipAn article in the Washington Post (12/14/02) discussed the real estate markets in the Washington area and quoted Wharton Real Estate Professor, Susan Wachter. In a hot real estate market, buyers can often build equity quickly. "This is a way of people participating in housing price increases and growing their wealth," Wachter said.
Philadelphia Inquirer Reports on Researchers Enlisted in a Broad National Security EffortThe Philadelphia Inquirer (1/20/03) reported on researchers who have been brought together to brainstorm on tactics for dealing with an unstable world. Professor Susan Wachter has been studying ways that maps and satellite photos - geographical information systems - could be used to address social problems such as poverty and joblessness. Before Sept. 11, she developed a method for overlaying high-resolution satellite photos with maps showing public transportation, power distribution, census data, or other geographical information. But after Sept. 11, she said, she realized how valuable geographical information could be in emergency relief. New York City authorities used a combination of satellite photos overlaid with hundreds of maps, she said, to identify natural-gas lines, electrical lines, smoke plumes, tunnels, and other features needed to help rescue workers get access to the ground zero site while avoiding hazards. "New York City was a leader in putting together this kind of information," she said, but Philadelphia does not have the same information ready. "There's so much that needs to be done to bring Philadelphia and Pennsylvania up to the cutting edge."
Professor Rybczynski - An op-ed Article for the New York Times and Conferences in Russia and LAMartin Meyerson Professor of Urbanism and Real Estate, Witold Rybczynski, was at the Los Angeles County Museum of Art in December, in a public conversation entitled "Architecture and the Wow Factor," with New Yorker architecture critic Paul Goldberger. In January, Rybczynski was invited to speak at a Woodrow Wilson Center Conference on "The New Global History and the City," in St. Petersburg, Russia. Rybczyinski’s op-ed article on the architectural proposals for the World Trade Center site appeared in the New York Times (12/20/02). He suggested that the World Trade Center buildings should be inspiring cultural icons rather than bulky intruders upon the skyline.
Wharton Real Estate PhD. Candidate Kevin Gillen Quoted in the Philadelphia Daily NewsA research paper by Kevin Gillen, a Ph.D. student of real estate at the Wharton School was cited in an article about the property-tax debate in the Philadelphia Daily News (11/19/02). The article stated that Gillen sheds some light on the complications. Gillen's research is about the current assessments, so his focus is on what's unfair about the status quo, before the 2003 reassessments hit. Gillen finds that "the burden of over-assessment falls most heavily on middle-class Northeast Philadelphia" and that both very poor and very rich neighborhoods are under-assessed. As he says, "the implication is that the assessment process is redistributing wealth from the working- and middle-class neighborhoods of Philadelphia to the lower- and upper-income neighborhoods." In trying to explain these results, Gillen considers a number of factors, including Councilmanic districts. Economists aren't known for their political savvy, but that can give their findings an "out of the mouths of babes" quality: powerful because it's innocent.
Director of the International Housing Finance Program, Drs. Marja Hoek-Smit, in Spain and South AfricaMarja Hoek-Smit participated in the first meeting of the FIBSI faculty and student exchange program in December 2002, in Cartagena, Spain. The University of Pennsylvania, jointly with two other US Universities and several European Universities (the University of Amsterdam, Berlin University and the University of Cartagena) was awarded a USA/EU grant to foster international educational programs and student exchanges in urban environmental planning and economics.Together with faculty from Witwatersrand University Graduate School of Public and Development Management, the IHFP conducted its second executive education program for senior public and private sector housing finance officials in Johannesburg, South Africa, from January 27 to February 1, 2003. The course is part of a multi-year program to build up capacity in housing finance research and education in South Africa. The effort is part sponsored by USAID.
Wharton/Penn Real Estate Alumni Event in Northern CaliforniaThe Wharton/Penn Real Estate Industry Group of Northern California held its first event of 2003 at Catellus Urban Development Corporation's landmark Mission Bay project in San Francisco. Approximately 40 alumni attended a guided bus tour of the project. For further information about the Wharton/Penn Real Estate Group of Northern California, please contact Lesli Fellman (lesli@clearcreekpartners.com).
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