| CRED:spring,1998
William Wheaton
TTH 10:30-12:00 E52-252B (M,W,F)
W31-301 W31 (T,TH) 253-1723
11.433 (15.021j): REAL ESTATE ECONOMICS
This course applies the latest economic thinking and research to the
task of analyzing real estate markets and forecasting supply or demand.
In addition to the lectures and readings, the course involves 5 computer-based
exercises (30% of grade), a mid term and final exam (35% each of grade).
Reading materials will include a reading packet of journal articles
and the text: DiPasquale and Wheaton, Economics and Real Estate Markets
(Prentice Hall, 1996). The text can be purchased at the MIT Coop.
I. Introduction (2/2 -2/9)
A. The Real Estate Sector: the Capital and Property markets
1. Review of Economic concepts
B. Micro and Macro economic analysis
C. EXERCISE: Comparative statics: predicting changes in real
estate markets (2/4-2/11)
II. Residential land markets: prices and land use (2/11-2/23)
(No class on 2/16)
A. Location and prices: the indifference principle
B. Submarkets and land use segregation
C. Urban growth, rents and prices
III. Residential development (2/25-3/2)
A. The highest use for residential development
B. Location, land use and density
C. Long Run land use patterns
D. Land use transition between land uses (gentrification)
E. EXERCISE:determining optimal housing FAR (2/26-3/2)
IV. Industrial Location (3/4)
A. Historical development and changing technology
B. Transportation, and shipping costs
C. Tax and public policy effects
V. Office development (3/9-3/11)
A. Client or factor orientation
B. The office market and the Labor Market
C. A Theory of Multiple centered cities.
1. Agglomeration and clustering
2. The commercial Land Market
VI. Retail Development (3/16-3/18)
A. Retail Travel patterns and the distribution of stores
B. Pricing and spatial competition
C. Shopping centers and store clustering
D. EXERCISE: simulating potential shopping center demand (3/18-4/1).
MID-TERM EXAM (3/30)
VII. Local Government and land markets (4/1-4/6)
A. Property taxes, public expenditure and local services
B. Community choice, "capitalization", and income segregation
C. The fiscal incentives for land use regulation
VIII. Regulating Development (4/8-4/13)
A. Public goods and "Neighborhood" effects.
B. Internalizing external effects through government or contracts.
C. Regional infrastructure and land use Planning
D. EXERCISE: Transportation Planning (4/8-4/15)
IX. Regional Growth (4/15-4/22), no class on 4/20.
A. The Determinants of metropolitan growth
1. Export demand and Industrial development
2. Birth rates, migration and Wages
B. A Static model analyzing metropolitan growth
1. Demand and Supply Shocks and the cost of living
X. Macro analysis of the housing sector (4/27-5/4)
A. Units, households and Tenure choice
1. Demographic influences
B. Housing appreciation, mortgages and the cost of owning
C. Moving , Vacancy and Sales: the demand for housing quality.
D. Dynamic (Stock-flow) models of metropolitan Housing Markets
E. EXERCISE: Developing a housing market forecast (4/29-5/6)
XI. Macro Analysis of non-residential sectors (5/6-5/13)
A. The operation of non-residential Markets.
1. Vacancy, Absorption, leasing and tenure.
2. Long term trends in space usage.
B. Stock-Flow Theory and the existence of Real Estate Cycles.
1. Expectations, information and "efficient markets"
C. The cyclic behavior of office, industrial and retail markets.
FINAL EXAM: week of 5/18-22
11.433(15.021j) Reading List
I. Introduction, micro and macroeconomics: DiPasquale and Wheaton, Chapters
1,2.
II. Residential Land Markets: DiPasquale and Wheaton, Chapter 3.
Waddell, Berry, and Hoch, "Residential Property Values in a Multinodal
Urban Area: New Evidence on the Implicit Prices of Location", Journal
of Real Estate Finance and Economics, 7,2, September 1993, 117-143.
Wheaton,W. "A Bid-Rent approach to urban housing demand",
J.Urb. Economics,4,1977
Capozza, Dennis and Bob Helsley, "The Stochastic City", Journal
of Urban Economics, 28, 1990, 187-203.
III. Residential Development: DiPasquale and Wheaton, Chapter 4.
Capozza, D., and G. Sick, "Valuing Long Term Leases: The option
to Redevelop" ,Journal of Real Estate Finance and Economics, 4, 1991,
Harrison,D. and J.Kain, "Cumulative Urban Growth and Urban Density",
Journal of Urban Economics, 1 1974 pp 68-79.
Rosenthal, Stuart and R. Helsley, "Redevelopment and the Urban
Land Price Gradient", Journal of Urban Economics, 35,2 (1994) pp182-200.
IV. Industrial Location: DiPasquale and Wheaton, Chapter 5.
Shukla, V. and P. Waddell, "Firm Location and land use in Discrete
Urban Space",Rregional Science and Urban Economics, 21,2, July 1991,
225-251.
Lockwood, L and R. Rutherford, "The Determinants of Industrial
Property Value", Real Estate Economics, 24,2, Summer 1996, 257-272.
Struyk, and James, Intra Metropolitan Industrial Location, Lexington,
(1975)
V. Office Development: DiPasquale and Wheaton, Chapter 5.
Sivitanidou, Rena, " Do Office Firms value Access to Service Employment
Centers...", Journal of Urban Economics,40, 125-149 (1996)
Brennan, and Cannady, "Office rents in the Chicago CBD", AREUEA
Journal,fall,1984
Gordon,P.,Kumar, A.,Richardson,H. "Influence of Metropolitan Structure
on Commuting time." J.Urban Economics(Sept. 1989)
Thimothy, Darien, "Intraurban wage differentials and Commuting
time", (Chapter 3, MIT Dissertation), 1995.
VI. Retail Development: DiPasquale and Wheaton, Chapter 6.
Eppli, M and J.Benjamin, "The Evolution of Shopping Center Research",
Journal of Real Estaet Research, 9,1, winter 1994, 5-32.
Wolinsky,A. "Retail Trade Concentration due to Consumer's Imperfect
Information ", Bell Journal of Economics,14, (spring,1983)
Eppli,M and J. Shilling, "How Critical is a Good Location to a
Regional Shopping Center?", Journal of Real Estate Research, 12,3,
1996, 459-469.
Brueckner, J., "Inter Store Externalities and Space Allocation
in Shopping Centers", Journal of Urban Economics,7,1 (1993), 5-17.
VII. Land Markets and Local Government: DiPasquale and Wheaton, Chapter
13.
Rubinfeld,D. and P. Shapiro, "Micro estimation of the demand for
schooling" ,Regional Science and Urban Economics,19,3 (August, 1989)
Ladd, H.F.and F.Doolittle, "Who should take care of Poor People",
National Tax Journal, 35,3 (september,1982).
Wheaton,W. "The incidence of interjurisdictional differences in
commercial property taxes" ,National Tax Journal,Dec,1984
Miceli, Thomas, "The Decision to Regionalize the Provision of Education...",
Journal of Urban Economics,33,3, 344-360 (1993).
VIII. Externalities, Planning and Development Regulation: DiPasquale
and Wheaton, Chapter 14.
Asabere,P., Hachey,G., Grubaugh,S. "Architecture, Historic Zoning
and the Value of Homes." Journal of Real Estate Finance and Economics
(September 1989)
Speyrer, Janet, "The Effect of Land Use Restrictions on Market
Values of Single Family Homes in Houston", Journal Real Estate Finance
and Economics, 2,1989, pp117-130.
French,H.E. and R.Lafferty, "Effects of the California Coastal
Commission on Housing Prices",Journal of Urban Economics. July, 1984.
McCarthy, P. and R. Tay, "Economic Efficiency vs Traffic Restraint:
A Note on Singapore's Area License Scheme", Journal of Urban Economics,
34,1, 96-100 (1993).
IX. Regional Growth and Housing Markets: DiPasquale and Wheaton, Chapter
7.
Roback, J. "Wages, rents and the quality of life." Journal
of Political Economy (December 1982)
Bartik, T.,"Business Location Decisions in the U.S...", Journal
Of Business and Economic Statistics, 3,1,14-22, 1985
Norton, R.D. and J. Rees, "The Product Cycle and the Spatial Decentralization
of American Manufacturing", Regional Studies, 13,2 (1979)
Coulson, E. and Steven Rushen, "Sources of Fluctuations in the
Boston Economy",Journal of Urban Economics,38 (1995), 74-94.
X. Macro housing analysis: DiPasquale and Wheaton, Chapters 8,9,10.
Eppli, M and M. Childs, "A Descriptive Analysis of US Housing Demand
for the 1990s", Jourrnal of Real Estate Research , 10,1, 1995, 69-87.
Baryla, E and L. Zumpano, "Buyer Search Duration in the Residential
Real Estate Market"Journal of Real Estate Research, 10,1, 1995, pp1-15.
Yang, S. and A. Yavas, "Bigger is not better: Brokerage and Time
on the Market",Journal of Real Estate Research, 10,1, 1995, pp23-35.
Rosen,K. and Smith,L.,"The Price Adjustment Process for Rental
Housing and the Natural Vacancy Rate",American Economic Review, (September)
1983
Case,K. and Shiller,R. "The Efficiency of the Market for Single
Family Homes."American Economic Review (March 1989)
XI. Non Residential Macro Analysis: DiPasquale and Wheaton, Chapters
11,12.
Wheaton, W., Evans, P, R.Torto, "The Cyclic Behavior of the London
Office Market", Journal of Real Estate Finance and Economics, 15,1,
July 1997, 77-93.
Grenadier, S. "Local and National Determinants of Office Vacancies",
Journal of Urban Economics, 37,1, (1995) 57-72
Grenadier, S. "The Persistance of Real Estate Cycles", Journal
of Real Estate Finance and Economics, 10,2, (1995) 95-121.
Wheaton, William "Real Estate Cycles: Some Fundamentals",
(MIT Center for Real Estate (1998).
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