Market Efficiency, Housing Affordability and the Real Estate “Bubble” Samuel Alfred Leger
Basic Idea n n To develop a better understanding of the current real estate and housing markets Develop a new measure of housing affordability
Research Questions n n What is driving housing appreciation? Is the real estate market staying efficient? Is there actually a real estate “bubble”? What can recent homebuyers do to stay afloat in an inflated real estate market?
Research n n Develop a measure of housing market efficiency and use this measure also to consider housing affordability Examine housing market conditions within the Cape Fear region
Information Table Home Housing Mortgage Housing Ownership Stock Interest Affordability Rates Median (thousands) Price 1975 N/A 79, 087 14. 72% $35, 300 1985 63. 9% 99, 931 11. 93% $75, 500 1995 64. 7% 109, 457 8. 01% $113, 100 2004 69. 2% 122, 470 5. 88% $188, 900
Research n n Examine home prices, interest rates and household income to see how those variables have swayed. Interest rates adjust to record lows Household income and inflation were modest Possible drivers for housing affordability
Research and Process n n Developing a measure of housing affordability and tracking it over a period of time To discover any extremes in the market, either today or in the recent past.
Research and Process n n Considering median house prices along with the median household income; a ratio of these is developed for North Carolina with regional data reach conclusions about the local market.
Purpose n Give insight about market conditions, housing affordability and the much discussed real estate “bubble”
Bibliography n n n n n Anderson, Randy and Youguo Liang. , 2001, Mature and Yet Imperfect: Real Estate Capital Market Arbitrage, Journal of real Estate Portfolio Management, 7: 3, pg. 281. Fickes, Mike. , 2001, Feasting on Market Inefficiency Worldwide, National Real Estate Investor, 43: 11, pg. 26. Geddes, Ryan. , 2004, Housing Bubble Building? , Business Journal, 19: 49, pg. 1. Guran, Lleana. , 2000, Housing Opportunity Index, Housing Economics, 48: 6, pg. 3. Liang, Youguo and Richard A. Mc. Lemore. , 2004, Housing Appreciation- The Three Fundamental Drivers, Real Estate Finance, 21: 1, pg. 3. Rex, Tom R. , 2000, Housing Affordability Worsens For Low-Income Households, Arizona Business, 47: 11, pg. 5. Rex, Tom R. , 2001, Housing Appreciation Varies Widely Across Nation, Arizona Business, 48: 3, pg. 1. Wang, Peijie. , 2000, Market Efficiency and Rationality in Property Investment, Journal of Real Estate Finance and Economics, 21: 2, pg 185. Zietz, Emily N. , 2003, Multifamily Housing: A review of Theory and Evidence, The Journal of Real Estate Research, 25: 2, pg 185.
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