ECO 499 · Spring 2014 | Aaron Yelowitz

Archived syllabus. Policies, dates, assignments, and readings reflect Spring 2014.

Course information

Economics 499-002: Economics of Housing University of Kentucky Spring Semester 2014

Lectures Tuesday/Thursday, 9:30-10:45 am, Business and Economics Building 208.

Relevant info on me Professor Aaron Yelowitz Office: 335W Business and Economics Building Office hours: Tuesday/Thursday, 8:30-9:30 am, and by appointment. Email: aaron@uky.edu

My background: I am an associate professor in the economics department, and I have been at UK since 2001. Before I joined UK, I was an assistant professor in the economics department at UCLA, from 1994 to 2001. I received my Ph.D. in economics from MIT in 1994, and my B.A. from UC Santa Barbara in 1990. My research interest focus on welfare programs, minimum wages, health insurance mandates, and housing policy.

Enrolling in this Class

If you want to enroll in this class, you need to talk to Debbie Wheeler in the economics department; she handles that. Due to the nature of ECO 499, class size is limited. The class is already over-enrolled.

Course Description

This course is study various aspects of the economics of housing. First, we will examine recent movements in housing prices. Next, we examine the tax treatment of housing and how local amenities affect the valuation of housing. After that, we explore one of the major questions that motivates the favorable tax treatment of housing: Does home ownership cause positive externalities? The next topic in the course examines, in depth, the organization of the residential real estate market. Finally, we end by exploring mortgage discrimination.

In addition to exploring the economic theory, this class will examine recent, high-quality statistical analyses regarding these policy issues. A key objective in doing this is to not only ask what economists have found, but just as importantly, how they got to the answer.

It is likely that you may already be familiar with some of the issues we will cover in the class – these issues are often discussed in leading newspapers like the Wall Street Journal and New York Times. Some of the articles on the syllabus influence not only economists, but also reach the popular press. Our objective will go beyond the typical undergraduate textbook analysis, and explore some of the original studies in some detail.

Prerequisites

ECO 391, ECO 401 and ECO 402 (or equivalent). All prerequisites will be enforced, and the class is restricted to upper-division B&E Economics majors and A&S Economics majors.

Required Textbooks

There is no required textbook for this class. There are numerous academic readings that you are responsible for. Many of the readings are freely available from National Bureau of Economic Research (NBER) or through University of Kentucky’s electronic library. As a convenience, I have gathered up the readings and produce a downloadable ZIP file, so that you do not have to gather up the studies yourself.

Preparing for Class

We will generally follow the order of topics on the syllabus. In terms of the academic studies, you should attempt to read through them ahead of time, but there is no expectation that all parts of the study will be completely understandable to you.

Grading

The final is on Tuesday, May 6, 2014, at 8 am. It will count for 25% of your grade. It lasts 2 hours.
You will be given one midterm, in class, on Thursday, March 13, 2014. It will count for 25% of your grade. It lasts 75 minutes.
You will be assigned a paper topic during the semester prior to Spring Break. It will count for 25% of your grade. It will be due in class on Thursday, April 3, 2014. This satisfies the stated learning goal to evaluate “Written Communication Skills.”
Pop quizzes will count for 15% of your grade. Given the goals of this course, it is vital for students to attend class and prepare ahead of time by reading the material.
Class participation requirement will count for 10% of your grade. One of the stated learning goals for all ECO 499 classes is to evaluate “Oral Communication Skills.” As a consequence, at various times during the semester I will call on students and ask them questions. You will not know ahead of time if you will be called. To the extent that students voluntarily participate in class discussion, such participation will also count toward this portion of your grade.

University Holidays / Cancelled Classes

According to the university calendar, there will be no class on March 18 or March 30, 2014, for Spring Break.

Course outline and readings

Note: Bold readings include studies that we will spend a significant amount of time in class discussing; depending on time constraints, we may discuss some of the other studies as well.

I. Recent Movements in Housing Prices, Foreclosures and Other Phenomena

A. Housing Bubbles

Case & Shiller, 2003, “Is There a Bubble in the Housing Market?” Brookings Papers on Economic Activity, 2003(2), 299-362.

Comments by Mayer, Quigley and General Discussion in same PDF file

Himmelberg, Mayer & Sinai, 2005, “Assessing High House Prices: Bubbles, Fundamentals and Misperceptions,” Journal of Economic Perspectives 19(4), 67-92, Autumn.

B. Foreclosures

White, 2010, “Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis,” Wake Forest Law Review, 971-1023.

Ghent & Kudlyak, 2011, “Recourse and Residential Mortgage Default: Evidence from US States,” Review of Financial Studies, 24(9): 3139-3186.

Daneshvary & Clauretie, 2012, “Toxic Neighbors: Foreclosures and Short-Sales Spillover Effects from the Current Housing Market Crash,” Economic Inquiry, 50(1), 217-231, January.

Campbell, Giglio & Pathak, 2011, “Forced Sales and House Prices,” American Economic Review 101(5), 2108–2131, August.

C. Land Use Regulations and House Prices

Glaeser, Gyourko & Saks, 2005. “Why is Manhattan So Expensive? Regulation and the Rise in House Prices,” Journal of Law and Economics, 48(2), 331-370, October.

II. The Tax Treatment of Housing

Gruber, “Taxation in the United States and Around the World,” Public Finance and Public Policy, Chapter 18.

Poterba & Sinai, 2008a, “Tax Expenditures for Owner-Occupied Housing: Deductions for Property Taxes and Mortgage Interest and the Exclusion of Imputed Rental Income,” American Economic Review Papers and Proceedings, 96(2), May.

Poterba & Sinai, 2008b, “Income Tax Provisions Affecting Owner-Occupied Housing: Revenue Costs and Incentive Effects,” NBER Working Paper 14253, National Bureau of Economic Research, Inc.

III. Valuing Housing

Gruber, “State and Local Government Expenditures,” Public Finance and Public Policy, Chapter 10.

Black, 1999, “Do Better Schools Matter? Parental Valuation of Elementary Education,” Quarterly Journal of Economics, 114(2), 577-599, May.

Chay & Greenstone, 2005, “Does Air Quality Matter? Evidence from the Housing Market,” Journal of Political Economy, 113(2), 376-424, April.

IV. The Causal Effects of Homeownership

DiPasquale & Glaeser, 1999. “Incentives and Social Capital: Are Homeowners Better Citizens?,” Journal of Urban Economics, 45(2), 354-384, March.

Rossi & Weber, 1996. “The Social Benefits of Homeownership: Empirical Evidence from National Surveys,” Housing Policy Debate, 7(1), 1-35.

Green & White, 1997. “Measuring the Benefits of Homeowning: Effects on Children,” Journal of Urban Economics, 41, 441-461.

Engelhardt, Eriksen, Gale & Mills, 2010, “What are the Social Benefits of Homeownership? Experimental Evidence for Low-Income Households,” Journal of Urban Economics 67, 249–258.

Boehm & Schlottmann, 1999, "Does Home Ownership by Parents Have an Economic Impact on Their Children?" Journal of Housing Economics 8, 217–232

Currie & Yelowitz, 2000, “Are Public Housing Projects Good for Kids?” Journal of Public Economics, 75(1), 99-124, January.

Jacob, 2004. “Public Housing, Housing Vouchers, and Student Achievement: Evidence from Public Housing Demolitions in Chicago,” American Economic Review, 94(1), 233-258, March.

Popular Press Articles
National Association of Realtors, 2010, “Social Benefits of Homeownership and Stable Housing,” Research Division, August 2010

V. Buying & Selling Decisions and the Organization of the Real Estate Market

Munneke & Yavas, 2001. “Incentives and Performance in Real Estate Brokerage,” Journal of Real Estate Finance and Economics, 22(1), 5-21.

Bernheim & Meer, 2008. “How Much Value Do Real Estate Brokers Add? A Case Study,” NBER Working Paper 13796, National Bureau of Economic Research, Inc.

Merlo & Ortalo-Magne, 2004. “Bargaining over residential real estate: evidence from England,” Journal of Urban Economics, 56(2), 192-216, September.

Genesove & Mayer, 1997. “Equity and Time to Sale in the Real Estate Market,” American Economic Review, 87(3), 255-69, June.

Genesove & Mayer, 2001. “Loss Aversion And Seller Behavior: Evidence From The Housing Market,” Quarterly Journal of Economics, 116(4), 1233-1260, November.

Levitt & Syverson, 2008a, “Market Distortions when Agents are Better Informed: The Value of Information in Real Estate Transactions,” Review of Economics and Statistics, 90(4), 599-611, November.

Levitt & Syverson, 2008b, “Antitrust Implications of Outcomes When Home Sellers Use Flat-Fee Real Estate Agents,” Brookings-Wharton Papers on Urban Affairs, 2008, 47-93.

Hsieh & Moretti, 2003. “Can Free Entry Be Inefficient? Fixed Commissions and Social Waste in the Real Estate Industry,” The Journal of Political Economy, 111(5), pages 1076-1122.

Hendel, Nevo & Ortalo-Magne, 2009, “The Relative Performance of Real Estate Marketing Platforms: MLS Versus FSBOMadison.com,” American Economic Review, 99(5), 1878-1898.

Beck, Scott & Yelowitz, 2012, “Concentration and Market Structure in Local Real Estate Markets”, Real Estate Economics, 40(3), 422-460.

VI. Mortage Discrimination

Tootell, 1996, “Redlining in Boston: Do Mortgage Lenders Discriminate Against Neighborhoods?” Quarterly Journal of Economics, 111(4), 1049-1079, November.

Munnell, Tootell, Browne & McEneaney, 1996, “Mortgage Lending in Boston: Interpreting HMDA Data,” American Economic Review, 86(1), 25-53, March.

Day & Liebowitz, 1998, “Mortgage Lending to Minorities: Where’s the Bias?” Economic Inquiry, XXXVI, January 1998, 3-28.

Harrison, 1998, “Mortgage Lending in Boston: A Reconsideration of the Evidence,” Economic Inquiry, XXXVI, January 1998, 29-38.

Horne, 1997, “Mortgage Lending, Race, and Model Specification,” Journal of Financial Services Research, 11(1-2), 43-68, February.

Agarwal, Li & Mielnicki, 2003, “Morgages, Minorities and Discrimination: A Bank-Specific Approach,” Housing Studies, 18(3), 295-303, May.

Liebowitz, “A Study That Deserves No Credit,” Wall Street Journal, September 1, 1993.