The Value Impact of New Residential Construction and Neighborhood Disinvestment on Residential Sales Price

The topic of neighborhood redevelopment is central to residential appraisal and the lending process. We examine both the effect of neighborhood upgrading and decline, captured by subsidized new residential construction and sustained property tax delinquency respectively, on the sales price of one-to-two family homes. The research uses a two stage hedonic price model of 12,100 individual residential sales in Cleveland, Ohio during 1992-94. Results show a significant positive effect of $670 on the sales price of existing housing for each new unit built in a one-to-two block area. A decrease in sales price of$778 is associated with a 1% increase in the tax delinquency rate. The spatial variability of these effects is also explored.

The Capitalization of Seller Paid Consessions

Using a hedonic pricing model, we analyze the capitalization of total seller paid discount points and closing costs into the price of a house. We hypothesize that sellers are concerned about the sales price net of total seller paid concessions (SPNC), rather than the exact terms of the transaction. Since the SPNC is easily ascertained in the negotiation process, we further hypothesize that total seller paid concessions (TSPC) are fully capitalized into the sales price. To test this hypothesis, sales price is regressed on a set of control variables including TSPC. In this framework, TSPC will be positive and not significantly different from one if concessions are fully capitalized. The empirical results provide support for the capitalization hypothesis. Negotiation strategies and study limitations follow from the empirical results.

The Effect of Underground Storage Tanks on Residential Property Values in Cuyahoga County, Ohio

This study considers the effect of underground storage tanks on residential sales price. These effects are tested with a hedonic pricing model for all 1992 residential sales in Cuyahoga County, Ohio. Three types of tanks were tested: non-leaking tanks registered with the state of Ohio, leaking tanks that are currently not registered, and registered leakers. Results show that close proximity (same block or within 300 feet) to registered, non-leaking tanks and to unregistered leakers did not significantly affect sales price. However, proximity to a leaking, registered tank demonstrated a reduction in price of over 17%.

Privatization and Restructuring in Concentrated Markets

This paper examines the restructuring of state assets in markets deregulated by privatizations and investment liberalizations. We show that the government has a stronger incentive to restructure than the buyer: A firm restructuring only takes into account how much its own profit will increase. The government internalizes that restructuring increases the sales price not only from the increase in the acquirer's profit, but also from a reduced profit for the non-acquirer, whose profits decrease due to its rival's restructuring. We also identify situations where a slow sale can significantly reduce the sales price because of strategic investment and product market effects.Privatization; Asset Ownership; Restructuring

Privatization and Restructuring in Concentrated Markets

This paper examines the restructuring of state assets in markets deregulated by privatizations and investment liberalizations. We show that the government has a stronger incentive to restructure than the buyer: A firm restructuring only takes into account how much its own profit will increase. The government internalizes that restructuring increases the sales price not only from the increase in the acquirer’s profit, but also from a reduced profit for the non-acquirer, whose profits decrease due to its rival’s restructuring. We also identify situations where a slow sale can significantly reduce the sales price because of strategic investment and product market effects.Privatization, Asset ownership, Restructuring

The affordability of homeownership to middle-income Americans

From 1971 through mid-2007, the nominal national sales price of housing grew almost eightfold. Controlling for inflation, this represented a near doubling in the relative price of housing. The retrenchment in prices that began in 2007 has so far remained small compared to the earlier increase. ; As house prices climbed, many people complained that housing had become unaffordable to middle-income Americans. As early as 1998, newspapers warned that homeownership was becoming a heavy financial burden. As sales price rises accelerated in 2003 and crested in 2006, homeownership was increasingly portrayed as the “unattainable” American dream. ; Notwithstanding such concerns, homeownership actually rose strongly beginning in the mid-1990s and in 2004 attained its highest level ever. The more recent surge in foreclosures suggests many households indeed purchased homes they could not afford. Still, this does not necessarily imply that housing in general has become unaffordable to middle-income households. Instead, it may be that many defaults resulted from specific households purchasing specific houses whose location, size, and other attributes made their sales price too high relative to the purchasers’ financial resources. ; Rappaport seeks to answer the question of whether homeownership has indeed become less affordable to middle-income Americans. He also discusses some reasons why perceptions of affordability may have decreased. past.

Environmental Contamination and Industrial Real Estate Prices

This article is the winner of the Industrial Real Estate manuscript prize (sponsored by Society of Industrial and Office REALTORS) presented at the American Real Estate Society Annual Meeting. This article examines the effects of environmental contamination on the sales prices of industrial properties. Two general questions are addressed. The first is the extent to which sales prices may be impacted by contamination. The second is whether sales price effects due to contamination persist subsequent to the remediation of previously contaminated industrial properties. Using data on industrial property sales in Southern California, this study estimates sales price models that address these two questions. The results show that there are statistically significant impacts on property values in the period before and during remediation, but that these effects dissipate subsequent to cleanup.

The Effect of School Quality on Residential Sales Price

This study seeks to find the extent to which various measures of public school quality are capitalized into house prices after the No Child Left Behind Act (2001). Individual residential sales in Cuyahoga County, Ohio for 2000 and 2005 are analyzed as to the effect of school quality using regression analysis with a spatial error model. Results show that while all school quality measures tested have some explanatory power, school district ratings and performance index, which are comprehensive measures of school quality, are the most appropriate measures and are readily capitalized into housing prices.

A Note on Buyer's Agent Commision and Sales Price

The article examines whether and to what extent the level of a buyer’s agent commission will affect the sale price of a house. The estimation results suggest that a higher commission rate leads to a higher sale price, although only for lower-priced houses. It is suggested that, at least for this market segment, there may be a principal-agent problem: buyer’s agents do not act in the best interest of their clients because of the institutional structure of sales commissions.