Renegade Asset Markets

Renegade Asset Markets Local markets with tight land use controls result in prices rising relative to wages and affordability. Affordability is eased by unconventional but risky finance. Tight land use and loose financing in these renegade markets concentrates the impact of national or international shocks. A positive demand shock raises prices in these tight markets. If ongoing price momentum is expected, households switch to ownership and landlords reduce the rental stock. House prices, rents and occupancy rise and fall together in these markets. A five-equation sequential structure in land use, financial contracts, house prices, rents and vacancy for 17 United States cities confirms geographical concentration. Coastal California and South Florida are fundamentally risky markets. Discount rates there are three percentage points higher than the sample median. Two percentage points are attributable to land use and the other to unconventional finance. National and international financial crises are highly concentrated regionally. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Real Estate Finance and Economics Springer Journals
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Publisher
Springer US
Copyright
Copyright © 2011 by Springer Science+Business Media, LLC
Subject
Economics / Management Science; Regional/Spatial Science; Finance/Investment/Banking
ISSN
0895-5638
eISSN
1573-045X
D.O.I.
10.1007/s11146-011-9358-4
Publisher site
See Article on Publisher Site

Abstract

Local markets with tight land use controls result in prices rising relative to wages and affordability. Affordability is eased by unconventional but risky finance. Tight land use and loose financing in these renegade markets concentrates the impact of national or international shocks. A positive demand shock raises prices in these tight markets. If ongoing price momentum is expected, households switch to ownership and landlords reduce the rental stock. House prices, rents and occupancy rise and fall together in these markets. A five-equation sequential structure in land use, financial contracts, house prices, rents and vacancy for 17 United States cities confirms geographical concentration. Coastal California and South Florida are fundamentally risky markets. Discount rates there are three percentage points higher than the sample median. Two percentage points are attributable to land use and the other to unconventional finance. National and international financial crises are highly concentrated regionally.

Journal

The Journal of Real Estate Finance and EconomicsSpringer Journals

Published: Dec 24, 2011

References

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