Cloud over commercial real estate is slowly lifting in Texas
Every segment of the Texas commercial property sector suffered during the recession of 2009. Demand withered for space in offices, warehouses and retail centers, pushing up vacancy rates and lowering rental rates. Private nonresidential construction dropped sharply, reaching near-record lows. The global financial crisis temporarily brought lending to a halt. Commercial-mortgage-backed securities (CMBS) lending dried up in Texas and the U.S. as it became clear that repackaging suspect loans didn't lower risk. Banks also became wary of adding CRE loans to their books, especially in Texas, where ...
Housing and the economic recovery
Remarks at the New Jersey Bankers Association Economic Forum, Iselin, New Jersey.
Commercial real estate and low interest rates
Commercial real estate construction faltered during the 2007 recession and has improved only slowly during the recovery. However, low interest rates have led to higher property valuations and are clearly benefiting the sector. The recovery of commercial property prices has been notable. Some measures suggest that, in some segments of the market, prices are close to their pre-recession highs. Valuation measures do not suggest that current prices are excessive.
Real estate bubbles and weak recoveries
The slow economic recovery may be, at least in part, the natural result of the real estate bubble.
Sold! : James River islands auctioned
A bit better, but very far from best
Remarks at the Fordham Corporate Law Center Lecture, New York.
Time and risk diversification in real estate investments: assessing the ex post economic value
Welfare gains to long-horizon investors may derive from time diversification that exploits non-zero intertemporal return correlations associated with predictable returns. Real estate may thus become more desirable if its returns are negatively serially correlated. While it could be important for long horizon investors, time diversification has been mostly investigated in asset menus without real estate and focusing on in-sample experiments. This paper evaluates ex post, out-of-sample gains from diversification when E-REITs belong to the investment opportunity set. We find that diversification ...
How much is that home really worth? Appraisal bias and house-price uncertainty
With house prices often below the face value of mortgages these days, the expected return on many mortgages has tumbled, since one of the major forces supporting mortgages, the collateral, has weakened. One source of these mortgage problems has been the validity of the home appraisal, which is supposed to be an objective and expert dollar valuation of the house that should help make a mortgage less risky. Unfortunately, the appraisal process can go awry and often has. As Leonard Nakamura shows in this article, appraisals have been biased upward, making mortgages riskier. Now a reverse risk is ...
Investing for the long-run in European real estate
We calculate optimal portfolio choices for a long-horizon, risk-averse investor who diversifies among European stocks, bonds, real estate, and cash, when excess asset returns are predictable. Simulations are performed for scenarios involving different risk aversion levels, horizons, and statistical models capturing predictability in risk premia. Importantly, under one of the scenarios, the investor takes into account the parameter uncertainty implied by the use of estimated coefficients to characterize predictability. We find that real estate ought to play a significant role in optimal ...