Journal of Real Estate Finance and Economics, 19:1, 9±19 (1999)
# 1999 Kluwer Academic Publishers, Boston. Manufactured in The Netherlands.
What Is Real Estate Finance?
JOSEPH T. WILLIAMS
Professors Capital, 990 Highland Drive, Solana Beach, CA 92075
How does real estate ®nance relate to the core of contemporary ®nance? What research in real estate might most
interest ®nancial economists? What research is suggested by both recurrent ®nancial anomalies and stylized facts
in real estate? Some possiblities are discussed.
Key Words: real estate ®nance
What is academic research in real estate ®nance? How does it relate to the core of
contemporary ®nance? The latter is commonly thought to include ®nancial markets,
®nancial institutions, and non®nancial corporations. Among the many unsolved problems
in real estate ®nance, which might most interest ®nancial economists? What recurrent
patterns in the data are associated with these problems? What stylized facts seem to be
conventional wisdom or at least in common parlance among practicing professionals?
Finally, which problems might be most amenable to analytical techniques from the core of
This is not a survey of the literature in real estate ®nance.
Instead, it is the personal
perspective of one ®nancial economist. Why might a personal perspective be of interest?
The organizers of this special issue hoped that it might help to motivate other ®nancial
economists to start their own research in real estate. Why might the personal account of
this ®nancial economist be of any interest? Perhaps, it is my unusual background: nearly
twenty years doing both research in ®nance and business in real estate. The latter includes
buying, rehabilitating, selling, and sometimes syndicating most classes of commercial and
residential real estate.
2. Real Estate Finance versus Investments and Corporate Finance
My personal introduction to academic problems in real estate began more than ten years
ago. At that time, I helped to interview a prospective assistant professor of real estate
®nance. The candidate, a budding urban economist, was to be grilled by ten tenured faculty
of ®nance. As always, the ®nancial economists were skeptical about the academic content
of the rookie's research. Most telling was their very ®rst question: what is the difference