Changes In Property Values Research Articles

Contagion effects in strategic mortgage defaults

Abstract Using a large sample of U.S. mortgages observed over the 2005–2009 period, we document contagion effects in strategic mortgage defaults. Strategic defaults result from borrowers choosing to exercise their in the money default option and our findings suggest this choice is influenced by the delinquency rate in surrounding zip codes (within a 5 mile radius), after controlling for other known determinants of mortgage default. These controls include a large array of borrower and loan characteristics, local demographic and economic conditions, spatial correlations, and changes in property values. Our findings that the local area delinquency rate is an important factor for strategic defaulters (borrowers that can be influenced in their decision) but not for defaults that are the result of inability to pay (borrowers that had no choice) lend support the contagion hypothesis. Our estimates suggest that a 1% increase in the local area delinquency rate may increase the probability of a strategic default by 7.25–16.5%.

What Are the Benefits of the Water Framework Directive? Lessons Learned for Policy Design from Preference Revelation

The Water Framework Directive (WFD) seeks to achieve good ecological status of surface waters across the European Union by 2027. The WFD guidelines explicitly recognize the economics of water management by providing exceptions to water areas with disproportionately high restoration costs. This calls indirectly for estimations of benefits lost due to non-attainment. We employ a hedonic property pricing approach on waterfront recreational properties to estimate the welfare impacts of attaining the good ecological status described by the WFD. The empirical challenge is that the quality measure proposed by the WFD specifically denotes ecological quality, whereas economically measurable water quality values are heavily dependent on recreation impacts. Intuitively, the choice of water quality measure should have an effect on estimating the value of water quality. Our data provide a unique chance to compare three alternative indicators of water quality: (1) a usability-based index, (2) subjectively reported measure and (3) the ecological status determined by the WFD. We find that an improvement in water quality is associated with a statistically significant, non-linear change in recreational property values. We show how the ecological status compares with the other two indicators, and discuss the justifiability of using revealed preference methods when the valued good is defined purely on the basis of ecological criteria.

Forty years of rent control: Reexamining New Jersey’s moderate local policies after the great recession

This study replicates, using 2010 Census data, and extends past work on moderately rent-controlled municipalities in New Jersey, which began policies to stabilize rents while allowing landlords modest returns in the 1970s. Our approach compares controlled and non-controlled communities over 10,000 persons; and regresses rental housing characteristics (rent and quality/quantity) on two measures of rent control: nominal (1/0) and ordinal (an index of policy diversity/strength). Because the decade 2000–2010 was unique due to the housing bubble and recession, we expand previous analyses by introducing two additional dependent variables: changes in property values, which may be affected by restrictions on rents; and foreclosure rates, a problem affecting investors and a proxy for abandonment. We find that these 40-year-old policies do not exert any statistically-significant effects on their communities’ housing markets once other factors are controlled—a finding which has implications for affordable housing and advocacy in New Jersey and beyond.

Contemporary neighborhood housing dynamics in a mid-sized US city: the policy consequences of mismeasuring the dependent variable

This paper analyzes median assessed residential property values using three different operationalizations of a tract-level dependent variable for a mid-sized US city: Louisville, Kentucky. We estimated the impacts of accessibility, socio-demographics, and housing characteristics as well as three policy interventions (HOPE VI, historic preservation districts, and university–community partnerships) on median assessed values and changes to them over the 2000–2006 housing bubble. Our interpretation of models employing the three different operationalizations leads to different conclusions about neighborhood health and the efficacy of policy programs. Conventional operationalizations employed by advocates, such as looking at medians or raw dollar changes in median values, are likely to find that policy interventions have less of an impact compared to measuring recent percent changes in property values. Thus, we provide a methodological contribution that shows that percent changes should accompany traditional analysis in capturing the effects of contemporary policy interventions. Mismeasuring neighborhood housing markets has played a role in prematurely concluding that targeted policy programs in neighborhoods are ineffective. Based on our analysis, we invite academics and policy-makers to rethink contemporary neighborhood housing dynamics.

DO LOCATION‐BASED TAX INCENTIVES IMPROVE QUALITY OF LIFE AND QUALITY OF BUSINESS ENVIRONMENT?

ABSTRACTWe examine how location‐based tax incentives affect quality of life and business environment through changes in property values and equilibrium wages. Using the federal Empowerment Zone program, we determine whether offering tax incentives to firms improves the welfare of the citizens and attractiveness to firms. We demonstrate that quality of life methodologies can be applied using small geographically aggregated data, such as census block groups. We find that the tax incentives offered by the program notably enhances the quality of business environment for firms in the area while modestly improving the quality of life for the individuals living in the area.

Performance Evaluation of Heat Exchangers in OTEC Using Ammonia/Water Mixture as Working Fluid

The ocean thermal energy conversion (OTEC) system is a promising solution to provide stable electricity supply. Although the available temperature difference in OTEC systems is small, an ammonia/water mixture as working fluid is expected to decrease irreversible losses in the heat exchangers and to improve system performance. However, in actual heat exchangers, an adequate temperature crossing does not occur in the condenser but in the evaporator. Therefore, clarification of this characteristic is important. To date, the logarithmic temperature difference (LMTD) method is used in performance evaluations of OTEC heat exchangers. This method is of limited use if physical properties of fluids vary. A generalized mean temperature difference (GMTD) method is introduced to perform this evaluation. As changes in fluid property values can be considered in the GMTD method, method dependencies on heat exchanger characteristics, effectiveness, and system characteristics can be studied. In particular, GMTD and LMTD using a pure substance were found to be almost equal. Mean temperature differences using mixtures as working fluid were higher in the evaporator, but lower in the condenser, from the GMTD method than from the LMTD method. For higher ammonia concentrations in ammonia/water mixtures, the mean temperature differences from both methods are different.

Gated Communities and House Prices: Suburban Change in Southern California, 1980-2008.

Housing prices being one factor thought to contribute to segregation patterns, this article aims at differentiating gated communities from non-gated communities in terms of change in property values. To what extent do gated communities contribute to price filtering of residents, and do patterns of price differentiation favor gated communities in the long run? The article provides an analysis of the territorial nature of gated communities and how the private urban-governance realm theoretically sustains the hypothesis that property values within gated communities are better protected. In order to identify price patterns across time, we elaborate a spatial analysis of values (price distance index) by identifying gated communities with real estate listings in 2008 and matching these with historical data at the normalized census-tract level from the 1980, 1990 and 2000 census in the greater Los Angeles region. We conclude that gated communities are very diverse in kind. The wealthier the area, the more it contributes to fuelling price growth, especially in the most highly desired locations in the region. Furthermore, a dual behavior emerges in areas with an over-representation of gated communities. On the one hand, gated communities are located within local contexts that introduce greater heterogeneity and instability in price patterns. In this way, they contribute to a local increase in price inequality that destabilizes price patterns at neighborhood level. On the other hand, gated communities proliferate in contexts that show a very strong stability in terms of price homogeneity at the local level.

Conservation land acquisition lists and nearby property values: evidence from the Florida Forever programme

Agencies throughout the world are implementing plans to preserve open spaces. The demand to preserve open space is often justified based on the value of the amenities associated with the land. However, many times open space is valued most for what it is not: the absence of negative externalities associated with development of the open space. Florida has the most ambitious programme for acquiring conservation land of any state or nation in the world. Using evidence from Florida, this study determines whether being added to a conservation land acquisition list affects nearby property values. The Florida Department of Environmental Protection claims that being on the list should not trigger any changes in property values. The results of the hedonic regression models contradict this claim and provide evidence that being added to the conservation acquisition list (perceived as permanently undevelopable and publicly owned at some point in the future) does cause a positive increase in nearby property values for at least some of the open space projects analysed in this study.

Conservation land acquisition lists and nearby property values: evidence from the Florida Forever programme

Agencies throughout the world are implementing plans to preserve open spaces. The demand to preserve open space is often justified based on the value of the amenities associated with the land. However, many times open space is valued most for what it is not: the absence of negative externalities associated with development of the open space. Florida has the most ambitious programme for acquiring conservation land of any state or nation in the world. Using evidence from Florida, this study determines whether being added to a conservation land acquisition list affects nearby property values. The Florida Department of Environmental Protection claims that being on the list should not trigger any changes in property values. The results of the hedonic regression models contradict this claim and provide evidence that being added to the conservation acquisition list (perceived as permanently undevelopable and publicly owned at some point in the future) does cause a positive increase in nearby property values for at least some of the open space projects analysed in this study.

The Economic Impact of Greening Urban Vacant Land: A Spatial Difference-In-Differences Analysis

Vacant land is a serious problem in many cities, and cities have recently begun to explore greening as a management strategy to reduce the negative influence of vacancy. The city of Philadelphia, Pennsylvania pioneered the use of a simple greening treatment—removal of debris coupled with planting grass and trees—as a means of improving blighted communities. Though they are becoming more popular, the actual economic impact of these programs is not well understood. This paper details the use of a spatial difference-in-differences approach for measuring the impact of Philadelphia's innovative vacant land greening program on nearby residential property values. This approach compares observed changes in property values surrounding treated vacant lots with observed changes around control lots—lots which might have been treated but were not. While property values throughout the city increased during the study period, properties surrounding greened vacant lots had a greater increase in value than properties surrounding nongreened vacant lots. By developing both global and local versions of the model, we also explore spatial variation in the impacts of the program—offering insight into which kinds of neighborhoods might derive the greatest economic benefit from vacant land greening programs.

Crime and property values: Evidence from the 1990s crime drop

Does a dramatic drop in crime lead to an increase in property values? To date, the literature on how crime influences property values has focused solely within a single metropolitan area and has been limited primarily to cross-sectional analysis. In this study we exploit the dramatic, nationwide decrease in crime that occurred in the 1990s to examine the relationship between changes in crime rates and property values. To do this, we compile information on changes in property values and crime during the 1990s in nearly 3000 urban zip codes throughout the U.S. Using a fixed-effects framework as well as an instrumental variables strategy, our analysis implies a large and statistically significant association between crime and property values. The estimated elasticities of property values with respect to crime range from − 0.15 to − 0.35. Furthermore, zip codes in the top decile in terms of crime reduction saw property value increases of 7–19% during the 1990s. Both the empirical analysis and a graphical analysis are suggestive that decreasing crime leads to increasing property values.

Are Foreclosures Contagious?

Using a large sample of U.S. mortgages observed over the 2005-2009 period, we find that foreclosures are contagious. After controlling for major factors known to influence a borrower’s decision to default, including borrower and loan characteristics, local demographic and economic conditions, and changes in property values, the likelihood of a mortgage default increases by as much as 24% with a one standard deviation increase in the foreclosure rate of the borrower’s surrounding zip code. We find that foreclosure contagion is most prevalent among strategic defaulters: borrowers who are underwater on their mortgage but are not likely to be financially distressed. Taken together, the evidence supports the notion that foreclosures are contagious.

The Bending of Rectangular Deep Beams with Fixed at Both Ends under Uniform Load

The Maroochy River, which is located on east coast of Australia, provides a variety of uses and values to the community. Changes in structure, function and management of the river will influence the value that the community derives from it. Therefore, critical to the river’s continued management is the development of policy relevant tools based on the community’s value of the river. This paper focuses on estimating the financial value the local residents derive from living close to the river through investigation of changes in residential property values due to attributes of the Maroochy River. It is a complex analysis since there are several confounding geographical and property variables. Given a large and complete dataset of 28,000 properties for the Maroochy region, Artificial Neural Networks (ANN) was applied to estimate the economic value of the properties. This ANN was then able to simulate scenarios for property values with respect to changes in environmental features. It showed the Maroochy River contributed AU$900,000,000 to the unimproved capital value of the whole region, a value that could not be estimated previously, and much higher than anticipated. Calculating potential annual payments to the Shire Council through land tax analysis from these property values, provides the council with means to justify expenditure to maintain a standard of water quality and ecosystem health.

The Spatiality and Cost of Language Identity

The study uses Social Identity Theory as a framework to explain how language acts as a source of social identity and motivates individuals to sort themselves by residential location. To assess the validity of the framework, the study tests the hypotheses that group size, geography, and institutions matter in the preservation of language identity, using the 1991, 1996 and 2001 census data for urban Montreal, Toronto and Vancouver, Canada. The study models a system of three simultaneous equations that describe changes in property values and mobility of language groups, accounting for the presence of spatial lag and spatial error. The study estimates the model by generalized spatial two-stage least squares (Kelejian and Prucha, 1998). The results of the study show that, while residential segregation by language could be a cognitive behaviour, people’s search for language identity within a social group is influenced by economic opportunities in terms of capital gains in properties; it is also affected by proximity to peers and by government policies favouring language-based activities.

Contemporaneous Loan Stress and Termination Risk in the CMBS Pool: How “Ruthless” is Default?

This study analyzes the impact of contemporaneous loan stress on the termination of loans in the commercial mortgage-backed securities pool from 1992 to 2004 using a novel measure, based on changes in net operating incomes and property values at the metropolitan statistical area-property-type-year level. Employing a semi-parametric competing risks model for a variety of specifications, we find that the probability of default is extremely low even at very high levels of stress, although the coefficient estimates of greatest interest are very statistically significant. These results suggest substantial lender forbearance and are consistent with previous research that models default as a “gradual dynamic process” rather than a “ruthless” exercise once “in the money.”

Urban Transformation and Property Value Variation. The Role of HS Stations

The article aims reading and interpreting the positive externalities, especially in terms of urban redevelopment, connected to the building of node/station of the High Speed railway network. The measure of the variations of the real estate values, carried out through the analysis of numerous European and Italian experiences, is considered as a synthetic indicator of urban quality consequent to the strengthening or establishment of a new High Speed station. The identification of relationships between High Speed station, residential property values and typologies of cities (role and urban specialization) and urban context in which the station are located is one of the conclusions of this work. In accord with the aim, this paper is organized in three principal parts. The first part identifies the relation between urban transformations, urban quality and property values and provides a scientific frame of the studies on the relationships between accessibility increase and property values. Indeed, the results of many studies and reports reveal that the reduction in generalized cost of transport and the increase of accessibility related to the implementation of new infrastructure such as a railway station, in some cases have impacted significantly on increasing demand for space in the surrounding areas and, accordingly, on property values. The second part proposes the reading of some experiences of building of High Speed stations in some European and Italian cities, with a focus on the case of Roma-Napoli High Speed line. The choice of cases was made using criteria that seem to give a guarantee of representativeness to the variety and multiplicity of experiences. In particular, the criteria used are: geographic location of railway line (selecting cases with different geographical locations); city-node size (choosing different types of cities for size and population), functional role of the city-node, timing for the completion of railway line (fully in operation, partly in operation or not yet in operation). Besides, the description of each case is divided into: summary description of the characteristics of the HS railway line; description of the main features of cities that represent the nodes of the selected routes; identify the characteristics of the surrounding context of the railway station; measurement of the change in property values in the surrounding context of the railway station due to HS link. The third part provides a comparative outline of the effects of High Speed stations on property values and the urban typologies and characteristics that influence this relation. The first result of this article is a comparative framework between all study cases. In conclusion, the comparative reading shows that the effect from opening of the High Speed railway stations on property values is valuable in cases where it contributes significantly to raising the socio-economic and the quality conditions of spaces.

The good, the bad, and the algae: Perceiving ecosystem services and disservices generated by zebra and quagga mussels

Dreissenid (zebra and quagga) mussels are widely recognized as having strong, adverse ecological and economic impacts, e.g., biofouling and loss of water column primary production. We assessed perceptions and values associated with two less often considered ecological outcomes of dreissenid mussel influences on coastal ecosystems along Lake Ontario and the western St. Lawrence River in New York State. One, the generation of water clarity through filtration, we define as an ecosystem service; the other, the production of large amounts of nuisance algae (e.g., Cladophora and Microcystis) is defined as an ecosystem disservice. Surveys of business owners and homeowners quantified their preferences and the formation of values regarding these products of zebra mussel influence. Water clarity increased greatly, particularly in the eastern portion of Lake Ontario, and algal problems increased throughout. Businesses attributed increases and decreases in revenues associated with water clarity and algae; homeowners reported analogous changes in property values. Water clarity was positively associated, and algae negatively associated, with changes in revenues and property values. Threshold responses of costs as functions of filamentous algae were evident. Given the likely continued influx of invasive species due to human activities, further development of the ecosystem service concept should consider potential “goods” and “bads” of invasives and their influence on ecosystem and social system resiliency.

A Simplified Model of Heat and Mass Transfer Between Air and Falling-Film Desiccant in a Parallel-Plate Dehumidifier

This paper presents a simplified model to predict the heat and mass transfer between air and falling-film liquid desiccant during dehumidification in a parallel-plate absorber. First-order, ordinary differential equations are used to estimate the heat and mass transferred, and explicit equations are derived from conservation principles to yield the exiting absorber conditions for different flow arrangements. The developed model uses a control volume approach that accounts for the change in film thickness and property values. The model results were within 5% of a more complicated parallel-flow model currently available in literature. The model was also in good agreement with existing experimental data for a counterflow absorber.

Modelling the Financial Value of the Maroochy River to Property Values: An Application of Neural Networks

The Maroochy River, which is located on east coast of Australia, provides a variety of uses and values to the community. Changes in structure, function and management of the river will influence the value that the community derives from it. Therefore, critical to the river’s continued management is the development of policy relevant tools based on the community’s value of the river. This paper focuses on estimating the fi-nancial value the local residents derive from living close to the river through investigation of changes in residential property values due to attributes of the Maroochy River. It is a complex analysis since there are several confounding geographical and property variables. Given a large and complete dataset of 28,000 properties for the Maroochy region, Artificial Neural Networks (ANN) was applied to estimate the economic value of the properties. This ANN was then able to simulate scenarios for property values with respect to changes in environmental features. It showed the Maroochy River contributed AU$900,000,000 to the unim-proved capital value of the whole region, a value that could not be estimated previously, and much higher than anticipated. Calculating potential annual payments to the Shire Council through land tax analysis from these property values, provides the council with means to justify expenditure to maintain a standard of water quality and ecosystem health.

Evidence of the Dual Nature of Property Value Recovery Following Environmental Remediation

The literature on home value diminution attributable to environmental degradation and its possible reversal typically ignores indirect effects upon neighborhood characteristics that can exacerbate the overall change in property values, resulting in underestimates of diminution and overestimates of recovery. Furthermore, to the extent that direct price effects and neighborhood transition effects respond differently to remediation efforts, the relatively new postremediation literature misses an important part of the recovery process. This study examines both direct and indirect effects and finds in the case of Houston Environmental Protection Agency Superfund sites that, while the direct value impacts of proximity to toxic waste sites was significantly reduced after remediation, the indirect effects associated with induced demographic changes were much slower to reverse, producing a housing market inertia that stifled full home value recovery.