Risk and Return in the U.S. Housing Market PDF Download
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Author: Susanne E. Cannon
Publisher:
ISBN:
Category :
Languages : en
Pages : 34
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Book Description
This paper carries out an asset-pricing analysis of the U.S. metropolitan housing market. We use zip code level housing data to study the cross-sectional role of volatility, price level, stock market risk and idiosyncratic volatility in explaining housing returns. While the related literature tends to focus on the dynamic role of volatility and housing returns within submarkets over time, our risk-return analysis is cross-sectional and covers the national U.S. metropolitan housing market. The study provides a number of important findings on the asset-pricing features of the U.S. housing market. Specifically, we find i) a positive relation between housing returns and volatility with returns rising by 2.48% annually for a 10% rise in volatility, ii) a positive but diminishing price effect on returns, iii) that stock market risk is priced directionally in the housing market and iv) idiosyncratic volatility is priced in housing returns. Our results on the return-volatility-price relation are robust to i) MSA (metropolitan statistical area) clustering effects and ii) differences in socioeconomic characteristics among submarkets related to income, employment rate, managerial employment, owner occupied housing, gross rent and population density.
Author: Susanne E. Cannon
Publisher:
ISBN:
Category :
Languages : en
Pages : 34
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Book Description
This paper carries out an asset-pricing analysis of the U.S. metropolitan housing market. We use zip code level housing data to study the cross-sectional role of volatility, price level, stock market risk and idiosyncratic volatility in explaining housing returns. While the related literature tends to focus on the dynamic role of volatility and housing returns within submarkets over time, our risk-return analysis is cross-sectional and covers the national U.S. metropolitan housing market. The study provides a number of important findings on the asset-pricing features of the U.S. housing market. Specifically, we find i) a positive relation between housing returns and volatility with returns rising by 2.48% annually for a 10% rise in volatility, ii) a positive but diminishing price effect on returns, iii) that stock market risk is priced directionally in the housing market and iv) idiosyncratic volatility is priced in housing returns. Our results on the return-volatility-price relation are robust to i) MSA (metropolitan statistical area) clustering effects and ii) differences in socioeconomic characteristics among submarkets related to income, employment rate, managerial employment, owner occupied housing, gross rent and population density.
Author: Theodore M. Crone
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
The tradeoff between risk and return in equity markets is well established. This paper examines the existence of the same tradeoff in the single-family housing market. For home buyers, who constitute about two-thirds of U.S. households, the choice about how much housing and which house to buy is a joint consumption/investment decision. Does this consumption/investment link negate the risk/return tradeoff within the single-family housing market? Theory suggests the link still holds. This paper supplies empirical evidence insupport of that theoretical result. The views expressed here are solely those of the author and do not necessarily represent the views of the Federal Reserve Bank of Philadelphia or of the Federal Reserve System.
Author: Theodore M. Crone
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
The trade-off between risk and return in equity markets is well established. This paper examines the existence of the same trade-off in the single-family housing market. That market is dominated by homeowners, who constitute about two-thirds of U.S. households. For them the choice about how much housing and what house to buy is a joint consumption/investment decision. Furthermore, owner-occupied housing is by nature a lumpy investment whose risk cannot be completely diversified. Does this consumption/investment link negate the risk/return trade-off within the single-family housing market? Theory suggests the link still holds. This paper supplies empirical evidence in support of that theoretical result.
Author: Karl E. Case
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This paper investigates the risk-return relationship in determination of housing asset pricing. In so doing, the paper evaluates behavioral hypotheses advanced by Case and Shiller (1988, 2002, 2009) in studies of boom and post-boom housing markets. The paper specifies and tests a housing asset pricing model (H-CAPM), whereby expected returns of metropolitan-specific housing markets are equated to the market return, as represented by aggregate US house price time-series. We augment the model by examining the impact of additional risk factors including aggregate stock market returns, idiosyncratic risk, momentum, and Metropolitan Statistical Area (MSA) size effects. Further, we test the robustness of H-CAPM results to inclusion of controls for socioeconomic variables commonly represented in the house price literature, including changes in employment, affordability, and foreclosure incidence. Consistent with the traditional CAPM, we find a sizable and statistically significant influence of the market factor on MSA house price returns. Moreover we show thatmarket betas have varied substantially over time. Also, we find the basic housing CAPM results are robust to the inclusion of other explanatory variables, including standard measures of risk and other housing market fundamentals. Additional tests of the validity of the model using the Fama-MacBeth framework offer further strong support of a positive risk and return relationship in housing. Our findings are supportive of the application of a housing investment risk-return framework in explanation of variation in metro-area cross-section and time-series US house price returns. Further, results strongly corroborate Case-Shiller behavioral research indicating the importance of speculative forces in the determination of U.S. housing returns.
Author: Theodore M. Crone
Publisher:
ISBN:
Category : House buying
Languages : en
Pages : 31
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Book Description
This paper examines the existence of the same trade-off in the single-family housing market. That market is dominated by homeowners, who constitute about two-thirds of U.S. households. For them the choice about how much housing and what house to buy is a joint consumption/investment decision. Furthermore, owner-occupied housing is by nature a lumpy investment whose risk cannot be completely diversified. Does this consumption/investment link negate the risk/return trade-off within the single-family housing market? Theory suggests the link still holds. This paper supplies empirical evidence in support of that theoretical result. support of that theoretical result.
Author: Theodore M. Crone
Publisher:
ISBN:
Category : House buying
Languages : en
Pages : 31
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Book Description
Author:
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
The Federal Reserve Bank of Philadelphia presents the full text of the December 1997 working paper entitled "Risk and Return Within the Single-family Housing Market," written by Theodore M. Crone and Richard Voith. The text is available in PDF format. This paper investigates the existence of tradeoff in the single-family housing market. The authors find that a consumption and investment link negates the risk and return tradeoff within the single-family housing market.
Author: Robert Brogan
Publisher:
ISBN:
Category :
Languages : en
Pages : 29
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Book Description
Investors owned 15 percent of all single family houses in the U.S. in the year 2000, with a value of fixed assets that dwarfed that of any single manufacturing industry, and approached that of the entire manufacturing sector. Owner occupied and investor owned houses are functionally identical and in the same market, but investors are subject to substantially higher taxes on the ownership of their houses. As change and adjustments occur to bring the single family housing market into equilibrium, the rate of price appreciation that leaves owner occupiers in equilibrium will have investors taking losses and exiting the market, without some compensating differential.The results reported here for the period 1970-2000 support the proposition that the rates of return received by owner occupiers and investors are the same in equilibrium and just equal to the risk adjusted opportunity return. Notwithstanding the adverse tax treatment, investor returns can equal owner occupier returns in the presence of two conditions. First, if investors are in a higher tax bracket than owner occupiers, this raises their tax subsidy since losses on housing investments offset other income, thereby lowering total tax obligations. This reduction in after tax costs is more pronounced when borrowed funds are involved. Second, investors are in a better position than owner occupiers to enter or exit the market as profit opportunities present themselves. If investors can raise the rate of house price appreciation they experience, relative to owner occupiers, by just a fraction of a point, this is enough to bring investors returns into alignment with those of owner occupiers and also with opportunity cost.
Author: David J. Decker
Publisher: John Wiley & Sons
ISBN: 0470009292
Category : Business & Economics
Languages : en
Pages : 290
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Book Description
After five years of skyrocketing real estate prices, fueled by low interest rates, aggressive lenders, and relative economic prosperity, something has to give. Thanks to nonstop recent press coverage of America's overheated housing market, you are probably wary of buying your next property at the top of the market. So what should you do? Whether you're an individual investor or a homeowner, Cash In on the Coming Real Estate Crash shows you how to gauge the risk of a housing bust in your own local market. More importantly, it shows you how to hedge against a crash and position yourself to profit if the bubble bursts. Critical advice covers: * Identifying signs of an impending collapse * Balancing your real estate portfolio so a crash doesn't wipe you out * Conservative financing strategies * Developing a vision for value in any market * Buying low after the bubble bursts * Knowing when to sell * And many more strategies for making money when the real estate market collapses Peppered with true stories of how homeowners, small investors, and bona? fide real estate tycoons handled and mishandled past crashes, Cash In on the Coming Real Estate Crash is the resource you need to prepare for the comingdownturn, weather the storm, and emerge on the other side stronger than ever.
Author: Krister Andersson
Publisher: International Monetary Fund
ISBN: 1451948808
Category : Business & Economics
Languages : en
Pages : 38
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Book Description
It is well known that the preferential tax treatment of housing induces an inefficient allocation of saving and investment. This paper analyzes, in a portfolio framework, how eliminating the deductibility of mortgage interest payments for federal income tax purposes might affect investment in housing. Expected rate of return and risk is estimated for three assets, bonds, housing, and stocks. The possibility that assets are imperfect substitutes is explicitly recognized in one section of the paper. The model suggests that the share of housing is likely to decrease by 4 to 9 percentage points if mortgage interest payments are not deductible. This may call for careful phasing of the change in policy.
