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Wharton News "Self Storage" takes first in Seevak Research CompetitionThe Zell/Lurie Real Estate Center's Seevak Student Research Competition was Friday, April 17, 2009, with three student groups addressing the question, "Underwriting Risk after the Boom: When and Where to Invest?" The winning team, receiving a prize of $3,750, was MBA students Adam Cowburn, Marcus Lackey, Jackson Phillips, and Ahmed Wahedi, presenting their work on "Self Storage in Washington, D.C." Second place and a prize of $2,750 went to the undergraduate team of Nikhil Gupta, Theodore King, and Vikram Madan, presenting on "Opportunities in the Capital Structure: Hong Kong Office and Retail Sectors." And third place and a prize of $1,000 went to the MBA team of Yi Ming Eng, Patrick Kuo, Yang Yang, and Lulu Zhou for their work on "Targeting China's Rising Middle Class: Retail Opportunities in 2nd Tier Cities." This annual competition is a highlight for our real estate students, and an invaluable teaching tool to hone their research and presentation skills. Judges were Richard Green, President and CEO, Firstrust Bank; James D. Motta, Principal, Triton Atlantic Partners; and Chris D. Wheeler, Principal, Triton Atlantic Partners. We thank them for their efforts. We extend our gratitude to the family of Center member the late Sheldon Seevak for funding this very popular event for 24 years. Bucchianeri and the American Dream . . . Grace Wong Bucchianeri Assistant professor Grace Wong Bucchianeri's research on urban and housing policies was quoted in USA Today and the Boston Globe. In "Rethinking rent: Maybe we should stop trying to be a nation of homeowners" (3/22/09), Rebecca Tuhus Dubrow wrote, "A recent study. . .suggests that homeownership confers no real benefits. The study examined self-respect, perceived notions of control, time spent with friends and family, volunteer activities, and enjoyment of the neighborhood, among other things. On all of these measures, after controlling for income, health status, and home value, the study found no significant advantage for homeowners. In fact, homeowners were on average 12 pounds heavier, and they spent less time with friends. They also reported more 'pain' the term used in the study's survey-deriving from their homes than renters. Grace Wong Bucchianeri, an assistant professor at the Wharton School, conducted the study in 2005, at the top of the market. . . 'It challenges our notion of engaged, active, healthy homeowners,' says Bucchianeri. 'We're not looking at a lot of benefit here.'" Bucchianeri's research was cited in USAToday, in "Rent out the American Dream?" in which Richard Florida observed that regardless of the idea that homeownership is the American dream . . "homeownership doesn't make us happier. A recent study by Grace Wong Bucchianeri. . . shows that, controlling for income and demographics, homeowners are no happier than renters and report higher levels of stress." Financial Crisis Freezes Skyscraper Construction Joseph Gyourko Joe Gyourko was quoted in the Economix Blog of The New York Times (March 31) in "What's Stalling New York's Skyscrapers?," by Edward L. Glaeser, who wrote, "Four years ago, Joseph Gyourko and I provided evidence on a large gap between Manhattan condo prices, which were upwards of $600 per square foot in 2002, and the marginal costs of building such units, which were around $300 per square foot. The total costs of building would be higher than our construction cost figure, because they include land and other infrastructure costs, but those costs wouldn't rise with building height. In the absence of legal height restrictions, the cost of adding an extra apartment is just the cost of building up, which, I think, was and is still a lot less than the price of an apartment in Manhattan." Regulatory barriers, they reasoned, "could explain why, in an era of rapidly rising prices, Manhattan's new buildings were actually getting shorter. . . But if these barriers are so important, then it would be madness for developers who have gotten the green light to build a large tower just to give up. As long as condominium prices exceed construction costs—and the available data suggests that they still do—then developers should continue with their permitted projects. Why then, are so many projects being stalled?" Glaeser figures the lack of financing is the cause. "My guess is that buildings are still worth more to buyers than the cost of constructing them, but that lack of financing is stopping that from happening." In the Boston Globe (March 22), in "Rethinking rent: Maybe we should stop trying to be a nation of homeowners," Rebecca Tuhus Dubrow observed that some economists feel homeownership is no longer right for everyone.. . . . "'There's no reason we should all be homeowners,' says Joseph Gyourko, . . . coauthor of 'Rethinking Federal Housing Policy.' 'Homeownership has a lot of benefits, but it has costs, too.' According to this view, renting offers many advantages, and should be considered a viable long-term option for people of all ages and socioeconomic levels. Renters enjoy flexibility and freedom from the responsibilities of maintenance. Given the often overlooked costs and risks of homeownership, renting is in many cases a wise financial choice." When your House is Underwater, It's Tough to Move Fernando Ferreira Gyourko and Fernando Ferreira's work was referred to in the March 19 Economist, in "Labour mobility: The road not taken." Discussing the mortgage crisis, the author wrote, "Mobility is part of the American dream. . throughout history, Americans have dealt with economic shocks by picking themselves up and moving on. Their mobility underpins America's flexible, dynamic labour market." But that dream is threatened by the "housing bust. House prices have collapsed by 27% since their peak in 2006. By December last year a fifth of homeowners with mortgages owed more than their homes were worth. Such people are only half as likely to move as those whose homes are above water, estimate Joseph Gyourko and Fernando Ferreira." Housing Finance Program will focus on "Changing Global Environment"The International Housing Finance Program, under the direction of Marja Hoek-Smit, will hold its two-week program for emerging market economies in June. This year, the focus is on "Housing Finance in a Changing Global Environment," with sessions on Islamic Finance and Sharya compliant securitization. A two day securitization workshop will follow. For information and to apply, go to http://housingfinance.wharton.upenn.edu or email housingfinance@wharton.upenn.edu. Hoek-Smit goes to Egypt, Brazil, D.C. Marja Hoek-Smit Marja Hoek-Smit led a workshop on "Housing Markets and Subsidies: Who Gets What and Why" during the World Bank's Urban Week 2009 in Washington, D.C., March 9-12. The presentation focused on the current credit and economic crisis in emerging economies and its consequences for urban and housing policies, including the danger of returning to past closed and segregated systems to finance housing. It set out a framework for subsidy policy design. Hoek-Smit travelled to Egypt in March to finalize with the government, developers and financial institutions the details of a national program to create a broad middle income housing incentive program linked to mortgage lending. The program is to stimulate the construction of new middle-income housing and the market for used housing through alleviating supply bottlenecks and increasing access to mortgage finance. The mortgage sector is still small in Egypt (approximately 5,000 loans) and housing purchases are mostly based on short-term installment sales, which reduces affordability. In early April, Hoek-Smit went to Brazil, where the government of President Lula had just announced a one-million-house program to stimulate economic growth. Brazil's economy experienced a serious slow-down in the last quarter of 2008 and first quarter of 2009. The housing stimulus is to increase employment and includes household subsidies and a generous unemployment guarantee program. Hoek-Smit was invited to comment on the one million houses plan during a workshop with the main stakeholders-developers, financial institutions and central and local government. Wachter's Insights Sought Susan Wachter Susan Wachter has been in the news frequently with widely covered stories on the ongoing mortgage crisis, worsening global financial situation, and federal government bailout and stimulus efforts, being quoted in the The Washington Post, The Wall Street Journal, Bloomberg, and Associated Press. Dr. Wachter has also appeared on radio for WHYY's Radio Times, WBUR's On Point, and Bloomberg Radio. She moderated "Where do we go from here? The future of Fannie and Freddie," A Crisis is a Terrible Thing to Waste: Transforming America's Housing Policy, at the Furman Center for Real Estate and Urban Policy, NYU, in February. Site VisitThe School of Design Real Estate Club took a field trip to Voorhees Town Center in New Jersey in late January, part of a case study of the course REAL 821, Real Estate Development, with professor Jonathan Weller, who is shown below discussing the project's design with students.
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