Residential Real Estate

Real estate finance remains extremely primitive. Many years of frustration trying to improve policy have led only to my losing faith in politicians. I now participate in private sector efforts to upgrade these markets.

Measuring and Modeling Intergenerational Links in Relation to Long-Term Care

We pinpoint three intergenerational aspects of long‐term care that require further research. We outline innovations in modeling and measurement that would improve understanding of intergenerational linkages and their implementation in appropriate panel data..

Is the FHA Creating Sustainable Homeownership?

The FHA neither produces its own statistics on the sustainability of homeownership nor permit researchers access to data on borrower performance over time. We carefully construct the required tracking data to overcome this barrier and predict massive future problems. Our work raises questions about FHA’s accounting and its accountability.

A graph-theoretic approach to markets for indivisible goods

Many important markets, such as the labor market and the housing market, involve goods that are both indivisible and of budgetary significance. We introduce new graph-theoretic objects ideally suited to analyzing such markets.

The mortgage mess, the press, and the politics of inattention

In reviewing the Challenger tragedy, Richard Feynman identified a flawed O-Ring as the proximate cause and NASA’s flawed safety culture as a deeper cause. There has been no similar investigation of the mortgage mess, which has been baptized rather than understood. The Columbia tragedy sounds like an ominous warning on the future stability of housing finance markets.

Shared equity

Sharing of housing equity between a primary home buyer and a lender or co-investor, if done right, can better match the needs of home-buyers and investors and thereby further public policy objectives. Unfortunately, U.S. housing finance markets are far too rigid for such markets to develop in the appropriate way.

Trading frictions and house price dynamics

We model liquidity in housing markets. The model provides a simple characterization for the joint process of prices, sales, and inventory. We compare the implications of the model to certain properties of housing markets. The model can generate the large price changes and the positive correlation between prices and sales that we see in the data.

Comparative statics in markets for indivisible goods

We continue the graph-theoretic study of markets for large indivisible goods. We introduce homotopy methods to characterize market transitions. Remarkably there can be five and only five qualitatively distinct forms of market transition: Graft; Prune and Plant; Prune and Graft; Cycle and Reverse; and Shift and Replant.

Reassessing FHA risk

Actuarial reviews of FHA risk underestimate how many FHA borrowers are underwater and in economic distress and the risks they face. We propose measures that could be taken to improve the predictive accuracy of FHA risk assessment. We are pessimistic about their adoption for obvious reasons.

Machine learning and the spatial structure of house prices and housing returns

An early application of machine learning methods to characterize house prices and housing returns.

Rectifying the Tax Treatment of Shared Appreciation Mortgages

The IRS does not want to permit sharing of equity because it blurs the insanely rigid line between debt and equity. They can get away with this because not enough people care.

Facilitating shared appreciation mortgages to prevent housing crashes and affordability crises

Sharing of appreciation could have resolved the mortgage mess much sooner. it did not happen because not enough people care.

Discovering the hidden structure of house prices with a non-parametric latent manifold model

An early use of machine learning to accurately capture house values.

Equilibrium in a durable goods market with lumpy adjustment

Durable goods are an important component of the business cycle. Equilibrium models of durable goods markets are made difficult by the lumpy nature of individual purchases. We show that a straightforward approximation of the distribution of durable goods holdings gives rise to a tractable equilibrium model. We analyze the case of competition as well as that of a monopoly producer.

Home equity insurance: A pilot project

Home equity is the single largest component of household wealth for the majority of American households. Yet, there is virtually no way for the average family to insure itself against drops in home value and the ensuing destructive financial loss. We document the development and implementation of a home equity insurance program launched in 2002 in Syracuse, New York. One factor that limits these programs is that house price changes have a large idiosyncratic component.

The reverse mortgage market: problems and prospects

An article about reverse mortgages that notes many of the problems that have continued to plague them.

Housing Partnerships: A new system of housing Finance

Provides a rich description of markets for sharing housing equity. We always knew it was idealistic. Contact with reality since that time has been enlightening. Had I known then what I know now, the book would never have been written.

Collateral damage: How refinancing constraints exacerbate regional recessions

Falling property values make it impossible for may homeowners to refinance their mortgages when interest rates. fall We confirm that this form of collateral constraint has greatly reduced recent refinancing in states with depressed property markets. Minor institutional changes could have neutralized the damaging effects of the collateral constraints. The FHA since adopted our proposal by allowing streamlined refinancing. Most other lenders have not.

Miracle on sixth avenue

Sixth Avenue, long-vacant, boomed after the opening of Bed, Bath, and Beyond taught other retailers the value of locating there. This is a vivid example of information externalities and the delay induced by follow-my-leader behavior.