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Wharton News The "Superstar Cities" Phenomenon Todd Sinai For the entire interview, go to http://www.msnbc.msn.com/id/17541386/site/newsweek/. The Subprime MeltdownShould the government do something about the problems with subprime lending? The question was asked in Knowledge@Wharton (3/21) Interviewed for the article, Professor Joe Gyourko said, "'I think that for the moment, they should probably leave it alone,' warning that bailouts can make people more reckless in the future. 'We don't want to introduce moral hazard .... We don't understand this very well right now, so any regulation is probably going to be wrong or imprecise.' In fact, he says, the market is already correcting the problem. Lenders have dramatically cut their offerings of the most hazardous products-such as loans that require no down payment or proof of the borrower's income, or those which allow borrowers to decide for themselves how much to pay each month." The article continued, "Wharton real estate professor Todd Sinai describes the situation as a 'perfect storm,' given that three things had to happen for the subprime market to tank: Borrowers' incomes had to drop, interest rates had to rise and housing prices had to fall. 'It is extremely rare that all three things happen,'" Sinai said.Gyourko on the U.S. Dream of HomeownershipA paper by Professor Joseph Gyourko was cited in the Financial Times (3/13) concerning people getting "stuck" living in one place. "Why are people still living in Detroit, which has suffered for so long? Why not move to Chicago or New York? Ed Glaeser and Joe Gyourko argue that one serious barrier remains: houses do not walk…those who feel that they can find a good job in the big cities will move there and pay the higher rents. Those who are less confident of that would rather have no job in a cheap house than no job in an expensive house. Detroit will have residents for a long time to come."An article "U.S. Subprime Mortgage Delinquencies at 4-Year High," on Bloomberg.com (3/13) noted that U.S. subprime borrowers have been falling behind on their mortgages and foreclosures are rising, but quoted Professor Joseph Gyourko, "We see no evidence of significant rises in defaults in the regular loan market." A New York Times article (3/17) "Rising Trouble With Mortgages Clouds Dream of Owning Home," quoted Gyourko. Several large mortgage companies have stopped making new loans, and others have tightened lending standards. Hundreds of thousands of families who bought houses in the last two years are now losing them. …"Clearly we went too far,'' said Joseph E. Gyourko… '''It's not the case that high homeownership is always good.' … Homeownership also has a more problematic side: it locks people into an asset and ties them to a place. 'Too much homeownership might restrict mobility, and that may not be a good thing,' Professor Gyourko said." This article was also posted on thenewsblog.com. Crash? What Crash?Housing prices are being driven skyward in the choicest world cities. An article in Newsweek International (3/19) entitled "Endless Light: Crash? What crash? In the world's top cities, real estate has never been hotter," quoted Professor Gyourko. "You need a combination of two things: a growing number of high-income folks who want to be together in a certain market and an unwillingness or inability to provide substantially larger numbers of new housing. Certainly London fits the mold and so does Paris, where you have a growing economy, a skewing of income distribution and very limited supply in the areas that are much in demand."Nakahara and Linneman Tackle NFL StarsAsuka Nakahara and Peter Linneman taught in Wharton's NFL Business Management and Entrepreneurial Program, with 35 athletes from 15 NFL teams. The program is part of an ongoing NFL-NFLPA initiative to assist players in preparing for their post-playing careers. The sessions taught this year by Nakahara and Linneman concentrated on entrepreneurship and real estate development and investments. "They were very enthusiastic students, and hard workers too," said Nakahara.International Housing Finance ProgramThe International Housing Finance Program's director Marja C. Hoek-Smit traveled to Egypt in early April to conduct a workshop on "Housing Policies and Subsidies in Egypt" for public and private housing professionals in early April 2007.The IHFP's annual executive education program, "Improving Housing Finance Systems" will be June 4-14, and the "Workshop on Securitization", will be June 16-17. For a detailed program and application forms go to the IHFP website. Hoek-Smit is working closely with several emerging market countries to improve their housing policies, specifically, with the new governments of Peru and Brazil to stimulate private lenders and developers to serve middle and low-income households. She was invited by the transitional government of Mexico during the fall of 2006 to develop a white paper on Housing Subsidies and continue as a special advisor to the new Mexican government. In November Drs. Hoek-Smit gave a keynote address at the KfW conference in Berlin on "Financing Housing for the Poor: Connecting Low Income Groups to Markets", attended by selected senior international participants. She proceeded to South Africa, where she worked with the Treasury Department to develop incentives for private lenders and housing developers to expand the production of lower-middle income housing and discuss different tax credit and regulatory options. She was invited to give a speech on a similar topic at the University of Witwatersrand in Johannesburg. Rybczynski Wins Scully Prize; Publishes Last Harvest Witold Rybczynski Professor Rybczynski was the guest speaker at the ULI Young Leaders Group's monthly Fourth Friday Breakfast on March 23, at The Racquet Club in center city Philadelphia, where he discussed his most recently-published book, Last Harvest: How a Cornfield Became New Daleville: Real Estate Development in America from George Washington to the Builders of the Twenty-first Century, and Why We Live in Houses Anyway (Scribner; April 17, 2007). Peter Linneman-In Demand Speaker Peter Linneman Wachter on Subprime MortgagesWharton Real Estate Professor Susan M. Wachter was quoted in the Korean Daily Business Newspaper: Maeil Business Newspaper on March 22, in "Sub-prime debacle" about the problems in sub-prime mortgages. She was on a National Public Radio show on March 22, about sub-prime lending, and was interviewed on Rhode Island Public Radio that same day on the topic of high-end condos in Providence, and Boston buyers purchasing condos in Rhode Island. Dr. Wachter was interviewed on live TV on PowerLunch CNBC Business News with Bill Keller on March 20, speaking about the new housing starts data, and on radio on CBS News in Los Angeles on March 19 concerning "mortgage troubles and home ownership and whether we went too far." Dr. Wachter took part on a panel on CN8 live TV on Money Matters Today on March 13 on sub-prime mortgages and their effects on the economy.
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