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Real Estate Economics posted by duggu on 11/22/2007

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Courseware/Lectures

Test/Tutorials

Course Highlights

Prof. Wheaton provides lecture notes that expand upon the material in the course textbook, which he co-authored. Some of the assignments challenge students to solve problems using computer or data files.

Course Description

This course, offered by the MIT Center for Real Estate, focuses on developing an understanding of the macroeconomic factors that shape and influence markets for real property. We will develop the theory of land markets and locational choice. The material covered includes studies of changing economic activities, demographic trends, transportation and local government behavior as they affect real estate.

Technical Requirements

File decompression software, such as Winzip® or StuffIt®, is required to open the .zip files found on this course site. Microsoft® Excel software is recommended for viewing the .xls files found on this course site. Free Microsoft® Excel viewer software can also be used to view the .xls files. The .exe files found on this course site are executable programs.

Syllabus

Course

This course applies the latest economic thinking and research to the task of analyzing real estate markets and forecasting supply or demand.

Requirements

In addition to the lectures and readings, the course involves five computer-based exercises, a midterm and a final exam. Their weightings on a student’s course grade are shown in the table below.

ACTIVITIES	PERCENTAGES
Computer-based Exercises	30%
Midterm Exam	35%
Final Exam	35%

Readings

The course materials are two. First, there will be 12 lecture PDF files that represent the material in the lectures. This material represents a significant update and expansion of the text:

DiPasquale, Denise, and William Wheaton. Urban Economics and Real Estate Markets. Prentice Hall, 1996. ISBN 0132252449.

Second, there is a reader of journal articles, available to students at the MIT copy center.

Calendar

WEEK #	LEC #	TOPICS	KEY DATES
1	1	The Real Estate Sector: The Capital and Property Markets
	2	Micro and Macro Economic Analysis
2	3	Location and Rents: The Indifference Principle, Submarkets and Land Use Segregation
	4	Urban Growth, Rents and Prices	Problem Set 1 Due
3	5	The Highest Use for Residential Development Location, Land Use and Density
	6	Land Use Transition between Land Uses (Gentrification)
4	7	Historical Development and Changing Technology Transportation, and Shipping Costs Tax and Public Policy Effects	Problem Set 2 Due
5	8	The Office Market, and the Labor Market
	9	Theories of Multiple Centered Cities
6	10	Retail Travel Patterns and the Distribution of Stores Pricing and Spatial Competition
	11	Shopping Centers and Store Clustering
		Midterm Exam
7	12	Property Taxes, Public Expenditure and Local Services, Community Choice, "Capitalization", and Income Segregation	Problem Set 3 Due
	13	The Fiscal Incentives for Land Use Regulation
8	14	Public Goods and "Neighborhood" Effects Internalizing External Effects through Government or Contracts
	15	Congestion, Transportation Infrastructure and Planning Development
9	16	Units, Households and Tenure Choice
	17	Housing Appreciation, Mortgages and the Cost of Owning	Problem Set 4 Due
10	18	The Operation of Non-residential Markets
11	19	Long Term Trends in Space Usage and Demand Herd Behavior and Development "Games"
	20	The Time-series Properties of Housing and Commercial Space Markets
12	21	Stock-flow Theory and Real Estate Cycles
	22	Expectations, Information, and "Efficient Markets" The Issue: Can markets be forecast?
13	23	The Determinants of Metropolitan Growth
	24	A Model Analyzing Metropolitan Growth	Problem Set 5 Due
		Final Exam

Readings

Readings are assigned at the beginning of the week and apply to all of the lectures for that week. The reading chapters shown below refer to the course textbook:

DiPasquale, Denise, and William Wheaton. Urban Economics and Real Estate Markets. Prentice Hall, 1996. ISBN 0132252449.

WEEK #	LEC #	TOPICS	READINGS
1	1	The Real Estate Sector: The Capital and Property Markets	DiPasquale, and Wheaton. "Introduction, Micro, and Macroeconomics." Chapters 1 and 2.
	2	Micro and Macro Economic Analysis
2	3	Location and Rents: The Indifference Principle, Submarkets and Land Use Segregation	DiPasquale, and Wheaton. "Residential Land Markets." Chapter 3. Waddell, Paul, Brian J. L. Berry, and Irving Hoch. "Residential Property Values in a Multinodal Urban Area: New Evidence on the Implicit Prices of Location." Journal of Real Estate Finance and Economics 7, no. 2 (September 1993): 117-43. Bourassa, Steven C., Martin Hoesli, and Jian Sun. "The Price of Aesthetic Externalities." Geneva: Institutional Center for Financial Asset Management and Engineering, 2003. Meese, Richard, and Nancy Wallace. "Testing the Present Value Relation for Housing Prices: Should I Leave My House in San Francisco." Journal of Urban Economics 35, no. 3 (1994): 45-266.
	4	Urban Growth, Rents and Prices
3	5	The Highest Use for Residential Development Location, Land Use and Density	DiPasquale, and Wheaton. "Residential Development." Chapter 4. Capozza, Dennis R., and Gordon A. Sick. "Valuing Long-Term Leases: The Option to Redevelop." Journal of Real Estate Finance and Economics 4, no. 2 (1991): 209-23. Helms, Andrew C. "Understanding Gentrification: An Empirical Analysis of the Determinants of Urban Housing Renovation." Journal of Urban Economics 54, no. 3 (2003): 474-98. Rosenthal, Stuart S., and Robert W. Helsley. "Redevelopment and the Urban Land Price Gradient." Journal of Urban Economics 35, no. 2 (1994): 182-200.
	6	Land Use Transition between Land Uses (Gentrification)	DiPasquale, and Wheaton. "Industrial Location." Chapter 5. Shukla, Vibhooti, and Paul Waddell. "Firm Location and Land Use in Discrete Urban Space: A Study of the Spatial Structure of Dallas-Fort Worth." Regional Science and Urban Economics 21, no. 2 (July 1991): 225-51. Lockwood, Larry J., and Ronald C. Rutherford. "The Determinants of Industrial Property Value." Real Estate Economics 24, no. 2 (Summer 1996): 257-72. Struyk, Raymond J., and Franklin J. James. Intrametropolitan Industrial Location: The Pattern and Process of Change. Lexington Books, 1975. ISBN: 0669998958.
4	7	Historical Development and Changing Technology Transportation, and Shipping Costs Tax and Public Policy Effects	DiPasquale, and Wheaton. "Office Location and Edge Cities." Chapter 5. Archer, Wayne, and Marc Smith. "Explaining Location Patterns of Suburban Offices." Real Estate Economics 31, no. 2 (2003): 139-64. Brennan, T. P., R. E. Cannady, and P. F. Colwell. "Office Rent in the Chicago CBD." Journal of the American Real Estate and Urban Economics Association 12, no. 3 (Fall 1984): 243-60. Gordon, Peter, A. Kumar, and H. W. Richardson. "Influence of Metropolitan Spatial Structure on Commuting Time." Journal of Urban Economics 26 (September 1989): 138-51. Shilton, Leon, and Craig Stanley. "Spatial Patterns of Headquarters." Journal of Real Estate Research 17, no. 3 (1999): 341-64.
5	8	The Office Market, and the Labor Market
	9	Theories of Multiple Centered Cities	DiPasquale, and Wheaton. "Retail Development." Chapter 6. Eppli, Mark J., and John D. Benjamin. "The Evolution of Shopping Center Research: A Review and Analysis." Journal of Real Estate Research 9, no. 1 (Winter 1994): 5-32. Wheaton, William. "Percentage Rent in Retail Leasing: The Alignment of Landlord-Tenant Interests." Real Estate Economics 28, no. 2 (2000): 185-204. Eppli, Mark J., and James D. Shilling. "How Critical is a Good Location to a Regional Shopping Center?" Journal of Real Estate Research 12, no. 3 (1996): 459-69. Micheli, Thomas, C. F. Sirmans, and Denise Stake. "Optimal Competition and Allocation of Space in Shopping Centers." Journal of Real Estate Research 16, 1 (1998): 113-25.
6	10	Retail Travel Patterns, and the Distribution of Stores Pricing, and Spatial Competition
	11	Shopping Centers, and Store Clustering
		Midterm Exam
7	12	Property Taxes, Public Expenditure and Local Services, Community Choice, "Capitalization", and Income Segregation	DiPasquale, and Wheaton. "Land Markets and Local Government." Chapter 13. Bogart, William T., and Brian A. Cromwell. "How Much is a Neighborhood School Worth?" Journal of Urban Economics 47, no. 2 (March 2000): 280-306. Ladd, H. F., and F. Doolittle. "Who Should Take Care of Poor People." National Tax Journal 35, no. 3 (September 1982). Wheaton, William. "The Incidence of Interjurisdictional Differences in Commercial Property Taxes." National Tax Journal 37 (December 1984): 515-28. Bates, Laurie J., and Rexford E. Santerre. "The Public Demand for Open Space: The Case of Connecticut Communities." Journal of Urban Economics 50, no. 1 (2001): 97-112.
	13	The Fiscal Incentives for Land Use Regulation
8	14	Public Goods and "Neighborhood" Effects Internalizing External Effects through Government or Contracts	DiPasquale, and Wheaton. "Externalities, Development Regulation, Infrastructure." Chapter 14. Coulson, N. Edward, and Robin M. Leichenko. "The Internal and External Impact of Historical Designation on Property Values." Journal of Real Estate Finance and Economics 23, no. 1 (2001): 113-24. Thorsnes, Paul. "Internalizing Neighborhood Externalities: The Effect of Subdivision Size and Zoning on Residential Lot Prices." Journal of Urban Economics 48, no. 3 (2000): 397-419. French, H. E., and R. Lafferty. "Effects of the California Coastal Commission on Housing Prices." Journal of Urban Economics (July 1984). McCarthy, Patrick, and Richard Tay. "Economic Efficiency vs. Traffic Restraint: A Note on Singapore's Area License Scheme." Journal of Urban Economics 34, no. 1 (1993): 96-100.
	15	Congestion, Transportation Infrastructure and Planning Development
9	16	Units, Households and Tenure Choice	DiPasquale, and Wheaton. "Macro Housing Analysis." Chapters 8, 9 and 10. Eppli, Mark J., and Monty J. Childs. "A Descriptive Analysis of U.S. Housing Demand for the 1990s." Journal of Real Estate Research 10, no. 1 (1995): 69-87. Baryla, Edward A., and Leonard V. Zumpano. "Buyer Search Duration in the Residential Real Estate Market: The Role of the Real Estate Agent." Journal of Real Estate Research 10, no. 1 (1995): 1-15. Gabriel, Stuart A., and Frank E. Nothaft. "Rental Housing Markets, The Incidence and Duration of Vacancy, and The Natural Vacancy Rate." Journal of Urban Economics 49, no. 1 (2001): 121-50. Shiller, Robert J., and Allan N. Weiss. "Moral Hazard in Home Equity Conversion." Real Estate Economics 28, no. 1 (Spring 2000): 1-33. Somerville, C. Tsuriel. "The Industrial Organization of Housing Supply: Market Activity, Land Supply, and the Size of Homebuilder." Real Estate Economics 27, no. 4 (1999): 669-95.
	17	Housing Appreciation, Mortgages and the Cost of Owning
10	18	The Operation of Non-residential Markets	DiPasquale, and Wheaton. "Macro Analysis of Non-Residential Property." Chapters 11 and 12. Wheaton, William, and Raymond Torto. "Retail Sales and Retail Real Estate." Journal of Real Estate Finance 12, no. 1 (Spring 1995): 22-31. Hakfoort, Jacco, and Robert Lie. "Office Space per Worker: Evidence from Four European Markets." Journal of Real Estate Research 11, no. 2 (1996): 183-97. Benjamin, John D., Jarjisu Sa-Aadu, and James D. Shilling. "Influence of Rent Differentials on the Choice between Office Rent Contracts with and without Relocation Provision." Journal of the American Real Estate and Urban Economics Association 20, no. 2 (Summer 1992): 289-303. Benjamin, John D. "Rationales for Real Estate Leasing versus Owning." Journal of Real Estate Research 15, no. 3 (1998): 223-39. Bulan, Laarni, Christopher Mayer, and C. Tsur Somerville. "Irreversible Investment, Real Options, and Competition: Evidence from Real Estate Development." Working Paper No. 391. University of Pennsylvania Wharton School Samuel Zell and Robert Lurie Real Estate Center, 1 July 2003.
11	19	Long Term Trends in Space Usage and Demand Herd Behavior and Development "Games"
	20	The Time-series Properties of Housing and Commercial Space Markets	(No reading from DiPasquale and Wheaton this week). Wheaton, William, and Raymond Torto. "Office Rent Indices and their Behavior Over Time." Journal of Urban Economics 35, no. 2 (March 1994): 121-39. Grenadier, Steven R. "Local and National Determinants of Office Vacancies." Journal of Urban Economics 37, no. 1 (1995): 57-72. Wheaton, William. "Real Estate 'Cycles': Some Fundamentals." Real Estate Economics 27, no. 2 (Summer 1999): 209-31. Wheaton, William, Peter Evans, and Raymond Torto. "The Cyclic Behavior of the Greater London Office Market." Journal of Real Estate Finance and Economics 15, no. 1 (July 1997): 77-93. Wheaton, William. "Real Estate Risk: A Forward Looking Approach," and "Evaluating Real Estate Risk: Debt Applications." Real Estate Finance 18, no. 3 (2001): 20-42. Benjamin, John, G. Donald Judd, and Daniel T. Winkler. "The Supply Adjustment Process in Retail Space Markets." Journal of Real Estate Research 15, no. 3 (1998): 297-308.
12	21	Stock-flow Theory, and Real Estate Cycles
	22	Expectations, Information, and "Efficient Markets" The Issue: Can markets be forecast?
13	23	The Determinants of Metropolitan Growth	DiPasquale, and Wheaton. "Regional Growth and Real Estate Markets." Chapter 7. Roback, Jennifer. "Wages, Rents and the Quality of Life." Journal of Political Economy 90, no. 6 (December 1982): 1257-78. Norton, R. D., and J. Rees. "The Product Cycle and the Spatial Decentralization of American Manufacturing." Regional Studies 13, no. 2 (1979): 141-51. Coulson, N. E., and Steven F. Rushen. "Sources of Fluctuations in the Boston Economy." Journal of Urban Economics 38 (1995): 74-94. Figlio, David N., and Bruce A. Blonigen. "The Effects of Foreign Direct Investment on Local Communities." Journal of Urban Economics 48, no. 2 (2000): 338-63.
	24	A Model Analyzing Metropolitan Growth
		Final Exam