Residential Properties Taken Under Eminent Domain: Do Government Appraisers Track Market Values?

Local governments often use powers of eminent domain to take residential properties for public use. In such cases the local government will use their appraisers (in-house or independent) to calculate an offer on the property. If the goal of the government is to avoid costly (use of administrative resources) litigation it may have an incentive to over-appraise the residential properties. Such over-valuation would transfer the cost to taxpayers. We compare the appraised value of sixty properties taken through eminent domain in Clark County, Nevada to comparable properties sold in free market transactions. We find evidence of over-appraisal of the properties taken by eminent domain. By valuing individual property characteristics differently from the market, the government over-appraised properties by approximately seventeen percent. We also provide evidence that the government may use simple rules for appraising the properties, whereas the market employs more complex rules.

The Effect of Tax Laws and the Cost of Capital on the Size of Newly Constructed Strip Shopping Centers

While the impact of tax policy and other economic variables on the total amount of construction has been widely studied, this paper proposes that these variables also affect the size distribution of the properties constructed. The basic intuition is that there is a lower bound to the economically feasible size of a project due to economies of scale in construction. Events favorable to construction, such as lower interest rates and more favorable tax treatment, relax this lower bound permitting the construction of smaller properties. We test this proposition using data on newly constructed neighborhood shopping centers in Clark County, Nevada during the period from 1971 to 1999.

Short-Term Own-Price and Spillover Effects of Distressed Residential Properties: The Case of a Housing Crash

Most previous empirical studies of price spillover effects of foreclosure on no-default transactions are based on data from a stable housing-market period. In this paper, we use 2008 transactions from a housing market with a relatively large number of REO/foreclosures. Our overall results indicate that: (1) REO and in the process of foreclosure have the same spillover effects, but short sales do not produce a spillover effect; (2) models that control for the overall market trend produce smaller spillover effects; (3) the marginal effect of an REO is 1%; (4) the cumulative effects of multiple distressed neighbors can be as severe as 8%; and (5) excluding transactions of homes that were sold under distress from the sample increases the estimated marginal spillover effect to about 2% and the cumulative effects to about 21%.

Effect of Foreclosure Status on Residential Selling Price: Comment

In this comment we examine the conclusion by Forgey, Rutherford, and VanBuskirk (1994) "that the foreclosed properties sold at a 23% discount," using a sample of nearly 2,000 residential property sales from the Las Vegas, Nevada area. We found that when not controlling for location with a set of dummy variables for ZIP codes, HUD foreclosed properties sold for between 12.18% and 13.96% below a random sample of properties not within one block of foreclosed properties. When controlling for location, using a set of thirty-one dummy variables for ZIP codes, the foreclosure discount fell to between 8.45% and 9.72%. When controlling for the common characteristics between foreclosed properties and their neighbors, we found foreclosure discounts are very small (between 0.17% and 2.48%) and no longer statistically significant. We conclude that foreclosure does not provide an opportunity for arbitrage profits, and this study does reinforce the findings of other studies that conclude real estate markets operate efficiently.

A Note on the Ranking of Real Estate Authors: Where Else Do They Publish and Who Cares?

A ranking of individuals who publish in three real estate journals shows that through the end of 1990 the top 10% of the authors had at least four articles in these journals. Among the top 10% of real estate authors (sixty-four individuals), some are finance authors who occasionally publish in real estate journals. An index of concentration indicates that the top twenty individuals are relatively more diversified with respect to the field in which they publish. Finally, some publications in real estate are frequently cited by other authors.

Regional Economic Diversification and Residential Mortgage Default Risk

Geographic diversification allows those involved in real estate markets to manage risk. In this paper we discuss the role of local economic diversification in risk management. We show that residential foreclosure rates are negatively related to local economic diversification. We conclude that geographical diversification with reference to local economic diversification is more efficient than naive geographic diversification alone.

Effect of foreclosure status on residential selling price: Comment

In this comment we examine the conclusion by Forgey, Rutherford and VanBuskirk (1994) “that the foreclosed properties sold at a 23% discount,” using a sample of nearly 2,000 residential property sales from the Las Vagas, Nevada area. We found that when not controlling for location with a set of dummy variables for zip codes, HUD foreclosed properties sold for between 12.18% and 13.96% below a random sample of properties not within one block of foreclosed properties. When controlling for location, using a set of thirty-one dummy variables for zip codes, the foreclosure discount fell to between 8.45% and 9.72%. When controlling for the common characteristics between foreclosed properties and their neighbors, we found foreclosure discounts are very small (between .17% and 2.58%) and no longer statistically significant. We conclude that foreclosure does not provide an opportunity for arbitrage profits, and this study does reinforce the findings of other studies that conclude real estate markets operate efficiently