Findings

In My Backyard

Kevin Lewis

June 20, 2012

When Walmart Comes to Town: Always Low Housing Prices? Always?

Devin Pope & Jaren Pope
NBER Working Paper, May 2012

Abstract:
Walmart often faces strong local opposition when trying to build a new store. Opponents often claim that Walmart lowers nearby housing prices. In this study we use over one million housing transactions located near 159 Walmarts that opened between 2000 and 2006 to test if the opening of a Walmart does indeed lower housing prices. Using a difference-in-differences specification, our estimates suggest that a new Walmart store actually increases housing prices by between 2 and 3 percent for houses located within 0.5 miles of the store and by 1 to 2 percent for houses located between 0.5 and 1 mile.

----------------------

Lessons from Over 30 Years of Buy versus Rent Decisions: Is the American Dream Always Wise?

Eli Beracha & Ken Johnson
Real Estate Economics, Summer 2012, Pages 217-247

Abstract:
Homeownership is touted as the "American Dream." It is credited with enhancing wealth; increasing civic pride; and improving self-esteem, crime prevention, child development and educational outcomes, among other benefits. This article does not dispute any of these claims. Instead, this study hypothesizes that crowding toward homeownership raises the price of homes above their fundamental value resulting in the purchase of a home becoming a contraindicative action. After setting the holding period to the average American's tenure in a residence, renting (not buying) proves to be the superior investment strategy over most of the study period.

----------------------

Emulation and state-by-state variations in bankruptcy rates

Richard Adkisson & Eduardo Saucedo
Journal of Socio-Economics, August 2012, Pages 400-407

Abstract:
This paper explores differences in personal bankruptcy rates across the American states. Particular emphasis is given to the Veblenian idea of emulative consumption where a desire to "keep up with the Jones"' results in over-borrowing leading eventually to bankruptcy. The paper posits an empirical model that incorporates a set of standard variables mentioned in the literature and variables specifically related to emulation, income level, income distribution and urbanization. Using state level pooled data for the period 2000-2009 the paper finds that the more unequal the distribution of income in a state and the more urban the state, the greater the bankruptcy rate in the state. These basic findings point to emulative consumption behavior as an important factor in explaining differences in personal bankruptcies across the states.

----------------------

The Political Risks of Fighting Market Failures: Subversion, Populism and the Government Sponsored Enterprises

Edward Glaeser
NBER Working Paper, May 2012

Abstract:
There are many possible ways of reforming the Government-Sponsored Enterprises that insure mortgages against default, including a purely public option, complete privatization or a hybrid model with private firms and public catastrophic insurance. If the government is sufficiently capable and benign, either public intervention can yield desirable outcomes; the key risks of any reform come from the political process. This paper examines the political risks, related to corruption and populism, of differing approaches to the problems of monopoly, externalities and market breakdowns in asset insurance. If there is a high probability that political leadership will be induced to pursue policies that maximize the profitability of private entities at the expense of taxpayers, then purely public options create lower social losses. If there is a high probability that leaders will pursue a populist agenda of lowering prices or borrowing costs, then catastrophic risk insurance can lead to lower social losses than either complete laissez-faire of a pure public option.

----------------------

Homeownership and Civic Engagement in Low-Income Urban Neighborhoods: A Longitudinal Analysis

Kim Manturuk, Mark Lindblad & Roberto Quercia
Urban Affairs Review, forthcoming

Abstract:
This paper tests whether there is a causal relationship between homeownership and two forms of civic engagement. We explore three theoretical linkages between homeownership and civic engagement: financial self-interest, the dwelling as a bundle of interests, and residential mobility. Using a sample of lower-income homeowners and a matched sample of renters, we analyze data on neighborhood group membership, social activity, homeownership status, and mobility over a 4-year period. Findings indicate that renters who became homeowners during the study period were no more involved in neighborhood organizations prior to homeownership than renters who did not become homeowners. However, involvement increased significantly after these renters became homeowners. We discuss the implications of this finding for policies aimed at promoting homeownership in lower-wealth urban neighborhoods.

----------------------

Are Investors the Bad Guys? Tenure and Neighborhood Stability in Chelsea, Massachusetts

Lynn Fisher & Lauren Lambie-Hanson
Real Estate Economics, Summer 2012, Pages 351-386

Abstract:
In this article, we examine the role of investors and occupant-owners in an urban context during the recent housing crisis. We focus on Chelsea, Massachusetts, because it is a dense city, dominated by multifamily housing structures with high rates of foreclosure for which we have particularly good data. We distinguish between occupant-owners and investors using local data, and we find that many investors are misclassified as occupant-owners in the Home Mortgage Disclosure Act data. Then, employing a competing risks framework to study ownerships during the period 1998 through mid-2010, we find that local investors, who tend to invest more in relation to purchase prices and sell more quickly, experienced approximately 1.8 times the mortgage foreclosure risk of occupant-owners, conditional on financing. Nonlocal investors have no statistically significant difference in foreclosure risk from occupant-owners. Nonetheless, those owners with subprime purchase mortgages (most of whom are occupant-owners) faced the highest foreclosure risk when house prices fell.

----------------------

Why Did So Many People Make So Many Ex Post Bad Decisions? The Causes of the Foreclosure Crisis

Christopher Foote, Kristopher Gerardi & Paul Willen
NBER Working Paper, May 2012

Abstract:
We present 12 facts about the mortgage crisis. We argue that the facts refute the popular story that the crisis resulted from finance industry insiders deceiving uninformed mortgage borrowers and investors. Instead, we argue that borrowers and investors made decisions that were rational and logical given their ex post overly optimistic beliefs about house prices. We then show that neither institutional features of the mortgage market nor financial innovations are any more likely to explain those distorted beliefs than they are to explain the Dutch tulip bubble 400 years ago. Economists should acknowledge the limits of our understanding of asset price bubbles and design policies accordingly.

----------------------

Are U.S. Cities Losing Power and Authority? Perceptions of Local Government Actors

Ann Bowman & Richard Kearney
Urban Affairs Review, July 2012, Pages 528-546

Abstract:
Have the power and discretionary authority enjoyed by U.S. local governments changed over the past decade? The answer to the question is sought not through creating a metric that gauges the legal or structural power possessed by cities and counties but rather by surveying well-placed actors who are in a position to know. Their assessments, for the most part, suggest that local jurisdictions, especially cities, have experienced an erosion of authority at the hands of their state governments.

----------------------

Subprime Lending Foreclosures, Crime, and Neighborhood Disorganization: Beyond Internal Dynamics

Brent Teasdale, Lynn Clark & Joshua Hinkle
American Journal of Criminal Justice, June 2012, Pages 163-178

Abstract:
Research and theorizing about communities and crime has largely focused on internal neighborhood dynamics, to the neglect of factors external to the community that may be important processes in shaping community crime rates. We argue that subprime lending practices and the foreclosures that result may result in higher crime rates. We utilize data from the Summit County Lending Study, the Akron Police Department, and the 2000 U.S. Census to test the hypothesis that subprime lending foreclosures increase crime in urban neighborhoods. We find that subprime lending foreclosures have substantial impact on crime counts, net of controls. We conclude that additional research and theorizing about the role of external factors in the disorganization model is required.

----------------------

Neighborhood disorder and individual economic self-sufficiency: New evidence from a quasi-experimental study

Rebecca Casciano & Douglas Massey
Social Science Research, July 2012, Pages 802-819

Abstract:
This paper draws on data from the Monitoring Mt. Laurel Study, a new survey-based study that enables us to compare residents living in an affordable housing project in a middle-class New Jersey suburb to a comparable group of non-residents. Building on the theoretical and empirical contributions of the Gautreaux and Moving to Opportunity studies, we test the hypothesis that living in this housing project improves a poor person's economic prospects relative to what they would have experienced in the absence of such housing, and that these improved prospects can be explained at least in part by reduced exposure to disorder and stressful life events. We find that residents in the Ethel Lawrence Homes are significantly less likely to experience disorder and negative life events and that this improvement in circumstances indirectly improves the likelihood of being employed, their earnings, and the share of income from work. We find no relationship between residence in the housing project and the likelihood of using welfare.

----------------------

Metropolitan Land Values and Housing Productivity

David Albouy & Gabriel Ehrlich
NBER Working Paper, May 2012

Abstract:
We present the first nationwide index of directly-measured land values by metropolitan area and investigate their relationship with housing prices. Construction prices and geographic and regulatory constraints are shown to increase the cost of housing relative to land. On average, approximately one-third of housing costs are due to land, with an increasing share in higher-value areas, implying an elasticity of substitution between land and other inputs of about one-half. Conditional on land and construction prices, housing productivity is relatively low in larger cities. The increase in housing costs associated with greater regulation appears to outweigh any benefits from improved quality-of-life.

----------------------

Do Municipal Amalgamations Work? Evidence from Municipalities in Israel

Yaniv Reingewertz
Journal of Urban Economics, forthcoming

Abstract:
Municipal amalgamation reforms are a policy being put to use in most developed countries. The basic rationale for most of these reforms is taking advantage of economies of scale in the municipal provision of public services. However, contrary to conventional wisdom of public officials, the related empirical literature, which relies mostly on descriptive evidence, finds almost no benefits arising from an amalgamation. The purpose of this paper is to present empirical evidence for the fiscal outcomes of municipal amalgamations based on the Difference-in-Differences methodology. The paper is using an extensive panel data of municipalities in Israel for the years 1999-2007 in order to analyze the Israeli amalgamation reform of 2003. The results indicate that the amalgamations resulted in a decrease of about 9% in municipal expenditures, and are robust to the possibility of selection bias. I find no evidence of a decrease in the level of services provided to the residents of the amalgamated municipalities. The results suggest that municipal amalgamations do bring economies of scale into practice.

----------------------

Crisis and Bankruptcy: The Mediating Role of State Law, 1920-1932

Mary Hansen & Bradley Hansen
Journal of Economic History, June 2012, Pages 448-468

Abstract:
The onset of the Great Depression did not spark a surge in personal bankruptcy. For debtors in default, state garnishment law played a significant role in the decision to file for bankruptcy. Only states that made it easy to garnish a debtor's wages experienced significant increases in bankruptcy as a consequence of the Depression.

----------------------

Housing Submarkets and the Impacts of Foreclosures on Property Prices

Arnab Biswas
Journal of Housing Economics, forthcoming

Abstract:
The dramatic rise in the number of foreclosed properties since 2006 has come to assume the proportions of a national crisis. It is widely acknowledged that foreclosures hurt neighborhoods by devaluing the nearby properties through various channels. This paper offers a new way of conceptualizing and then estimating the potential effects of foreclosures on property values. Housing stock heterogeneity in the central city old neighborhood allows for the possibility that the impacts of nearby foreclosures may differ across types of housing. This study uses a dataset that covers twenty years of housing values from the City of Worcester (MA), and finds evidence that foreclosures of multi-family houses in close proximity influence the sales price of surrounding single-family properties after controlling for impact from foreclosure of nearby single-family houses. The most preferred estimate suggests that each multi-family foreclosure that occurs between 660-1320 feet away from the sale lowers the predicted sales price by approximately 3 percent. Nearby multi-family spillover impacts also persist over time. In addition, a new approach advocating for an alternative definition of housing submarket suggests that a distant foreclosure within the same submarket also lower sales price of a single-family home by 0.1 percent.

----------------------

Adverse selection in mortgage securitization

Sumit Agarwal, Yan Chang & Abdullah Yavas
Journal of Financial Economics, forthcoming

Abstract:
Using several large data sets of mortgage loans originated between 2004 and 2007, we find that in the prime mortgage market, banks generally sold low-default-risk loans into the secondary market while retaining higher-default-risk loans in their portfolios. In contrast, these lenders retained loans with lower prepayment risk relative to loans they sold. Securitization strategy of lenders changed dramatically in 2007 as the crisis set in with most unwilling to retain higher-default-risk loans in return for lower prepayment risk. Contrary to the prime market, the subprime market does not exhibit any clear pattern of adverse selection.

----------------------

Housing Market Spillovers: Evidence from the End of Rent Control in Cambridge Massachusetts

David Autor, Christopher Palmer & Parag Pathak
NBER Working Paper, June 2012

Abstract:
Understanding potential spillovers from the attributes and actions of neighborhood residents onto the value of surrounding properties and neighborhoods is central to both the theory of urban economics and the development of efficient housing policy. This paper measures the capitalization of housing market spillovers by studying the sudden and largely unanticipated 1995 elimination of stringent rent controls in Cambridge, Massachusetts that had previously muted landlords' investment incentives and altered the assignment of residents to locations. Pooling administrative data on the assessed values of each residential property and the prices and characteristics of all residential transactions between 1988 and 2005, we find that rent control's removal produced large, positive, and robust spillovers onto the price of never-controlled housing from nearby decontrolled units. Elimination of rent control added about $1.8 billion to the value of Cambridge's housing stock between 1994 and 2004, equal to nearly a quarter of total Cambridge residential price appreciation in this period. Positive spillovers to never-controlled properties account for more half of the induced price appreciation. Residential investments can explain only a small fraction of the total.

----------------------

The Community Reinvestment Act and Mortgage Lending to Lower Income Borrowers and Neighborhoods

Neil Bhutta
Journal of Law and Economics, November 2011, Pages 953-983

Abstract:
This paper evaluates the Community Reinvestment Act (CRA), a law mandating that banks help meet the credit needs of lower income households and neighborhoods. To measure the effect of the law on lending to targeted groups since 1994, I take advantage of discontinuous targeting rules and abrupt changes in target status. On average, the CRA appears to have had little impact on mortgage lending, even during the mid-2000s, when lending to lower income areas nevertheless soared. I do find a significant effect during the late 1990s and early 2000s in large metropolitan areas, when and where the CRA may have been most binding. I use this episode to test the effect of the CRA on overall mortgage availability - that is, lending by both regulated and unregulated institutions. The results are consistent with the notion that government intervention in credit markets may be justified on the grounds that information externalities exist and can depress credit supply.

----------------------

Long-Term Effects of Public Low-Income Housing Vouchers on Neighborhood Quality and Household Composition

Deven Carlson et al.
Journal of Housing Economics, June 2012, Pages 101-120

Abstract:
In this paper we estimate the effect of housing voucher receipt on the composition of recipient households and the quality of the neighborhoods in which recipient households reside. Drawing on a dataset that contains extensive information on a large and diverse panel of low-income families for up to five years following voucher receipt, we isolate the effects of voucher receipt using propensity score matching techniques together with regression adjustment. Full-sample results show voucher receipt to have little effect on neighborhood quality in the short-term, but some positive long-term effects. We also find that voucher receipt is tied to a higher probability of change in household composition in the year of voucher receipt, but greater stability in subsequent years. Our large sample allows us to explore differential responses of geographic and socioeconomic subgroups. Our findings have several implications for both research and policy.

----------------------

Are house prices too high in China?

Ling Shen
China Economic Review, forthcoming

Abstract:
This short note defines a new measurement of housing affordability in terms of permanent income. Using this new measurement, we find that housing affordability in China is very strong relative to other developed economies, although the ratio of housing prices to current income in China is much higher than those of developed nations.

----------------------

Traffic noise and executive functioning in urban primary school children: The moderating role of gender

Goran Belojevic et al.
Journal of Environmental Psychology, forthcoming

Abstract:
The objective of this study was to examine the relationships between noise and school children's executive functioning (EF). The study included 311 children (146 boys and 165 girls) aged 7-11 years, who lived in the center of Belgrade. Teachers rated children's EF on a standard scale evaluating their ability to work independently in a focused manner to achieve an end goal as well as children's ability to follow directions carefully. Residential noise exposure was estimated in three daytime intervals, one evening interval and two nighttime intervals in the middle of the streets where children lived. School noise exposure was measured on three different school days in front of children's schools. Socioeconomic status (mother's highest level of education and family income) was used as a statistical control. There were no significant main effects of ambient noise levels on EF, however, a significant interaction indicated adverse noise impacts on boy's EF. We discuss possible reasons for male EF vulnerability to noise.


Sign-in to your National Affairs subscriber account.


Already a subscriber? Activate your account.


subscribe

Unlimited access to intelligent essays on the nation’s affairs.

SUBSCRIBE
Subscribe to National Affairs.