Professor of Real Estate and Business Economics & Public Policy, the Wharton School, University of Pennsylvania; Research Associate, National Bureau of Economic Research (NBER), Cambridge, Massachusetts

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Superstar Cities

Differences in house price and income growth rates between 1950 and 2000 across metropolitan areas have led to an ever-widening gap in housing values and incomes between the typical and highest-priced locations. We show that the growing spatial skewness in house prices and incomes are related and can be explained, at least in part, by […]

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Housing and the Financial Crisis

Conventional wisdom held that housing prices couldn’t fall. But the spectacular boom and bust of the housing market during the first decade of the twenty-first century and millions of foreclosed homeowners have made it clear that housing is no different from any other asset in its ability to climb and crash. Housing and the Financial […]

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How Parents Influence the Wealth Accumulation of Their Children

We decompose the channels through which parents and children have correlated net worth using a novel administrative data set from Sweden that follows a panel of parents matched to their grown children. We find that children’s initial endowments of net worth and their subsequent net worth accumulations are positively correlated with parents’ net worth. There […]

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Can Owning a Home Hedge the Risk of Moving?

Conventional wisdom holds that one of the riskiest aspects of owning a house is the uncertainty surrounding its sale price, especially if one moves to another housing market. However, households who sell a house typically buy another house, whose purchase price is also uncertain. We show that for such households, home owning often hedges their […]

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Timing the Housing Market

We create reliable measures of the cost of owning and the cost of renting that enable us to compare the level of rents and ownership costs across MSAs. We show that households can predict whether renting or owning will end up being less expensive ex post. This exercise is more robust than trying to predict […]

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House Price Moments in Boom-Bust Cycles

This paper describes six stylized patterns among housing markets in the United States that potential explanations of the housing boom and bust should seek to explain. First, individual housing markets in the U.S. experienced considerable heterogeneity in the amplitudes of their cycles. Second, the areas with the biggest boom-bust cycles in the 2000s also had […]

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Safety in Renting

A recent decline in the home ownership rate raises the possibility that people now realize that home owning is too risky for some. However, we should not forget that renting also is risky for others. This article outlines two sources of risk that owning avoids and renting does not – by owning, low-mobility households can […]

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Understanding and Mitigating Rental Risk

The decision of whether to rent or own a home should involve an evaluation of the relative risks and the relative costs of the two options. It is often assumed that renting is less risky than homeownership, but that is not always the case. Which option is riskier depends on the risk source and household […]

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Revenue Costs and Incentive Effects of the Mortgage Interest Deduction for Owner-Occupied Housing

We analyze how changes in the income tax deduction for mortgage interest would affect loan-to-value ratios on owner-occupied homes, the distribution of income tax liabilities, and the consumption of housing services. Using the 2004 Survey of Consumer Finances, we estimate that repealing the mortgage interest deduction in 2003 would have raised federal and state income […]

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Commitment, Risk and Consumption: Do Birds of a Feather Have Bigger Nests?

We show that incorporating consumption commitments into a standard model of precautionary saving can complicate the usual relationship between risk and consumption. In particular, we present a model where the presence of plausible adjustment costs can cause a mean-preserving increase in unemployment risk to lead to increased consumption. The predictions of this model are consistent […]

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Feedback between Real-Estate and Urban Economics

This paper considers the implications of increasing land supply constraints in the United States on urban demand. First, because shifts in demand are now capitalized more into the price of land, house prices in some metropolitan areas have grown increasingly unaffordable to typical households. This might have an effect on the fundamental character of such […]

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Tax Expenditures for Owner-Occupied Housing: Deductions for Property Taxes and Mortgage Interest and the Exclusion of Imputed Rental Income

Federal income tax policy affects the cost of homeownership for many households. Popular discussions of the favorable tax treatment of owner occupied housing usually focus on the tax-deductibility of mortgage interest and property tax payments, as well as the specialized tax rules that affect housing capital gains. Academic discussions, in contrast, emphasize the exclusion of […]

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U.S. House Price Dynamics and Behavorial Finance

We examine the relative roles of fundamentals and psychology in explaining U.S. house price dynamics. Using metropolitan area data, we estimate how the house price-rent ratio responds to fundamentals such as real interest rates and taxes (via a user cost model) and availability of capital, and behavioral conjectures such as backwards-looking expectations of house price […]

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Net Worth and Housing Equity in Retirement

This paper documents the trends in the life-cycle profiles of net worth and housing equity between 1983 and 2004. The net worth of older households significantly increased during the housing boom of recent years. However, net worth grew by more than housing equity, in part because other assets also appreciated at the same time. Moreover, […]

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Owner-Occupied Housing as a Hedge Against Rent Risk

Many people assume that the most significant risk in the housing market is that homeowners are exposed to fluctuations in house values. However, homeownership also provides a hedge against fluctuations in future rent payments. This paper finds that, even though house price risk endogenously increases with rent risk, the latter empirically dominates for most households […]

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The Asset Price of Capital Gains Taxes: Evidence from the Taxpayer Relief Act of 1997 and Publicly-Traded Real Estate Firms

We provide new evidence that corporate-level investment subsidies can be substantially capitalized into asset prices by examining the relative stock price performance of publicly traded companies in the real estate industry that should have been differentially affected by the capital gains tax rate reduction enacted in the Taxpayer Relief Act of 1997. By comparing real […]

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Chapter 5: The Spatial Distribution of Mortgage Interest Deduction Benefits Across and Within Metropolitan Areas in the United States

Chapter 5: The Spatial Distribution of Mortgage Interest Deduction Benefits Across and Within Metropolitan Areas in the United States with Joseph Gyourko, in Richard Green and Andrew Reschovsky, eds, Using Tax Policy to Increase Homeownership Among Low- and Moderate-Income Households: Final Report to the Ford Foundation, November 2001, pp. 137-186.

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The REIT Vehicle: Its Value Today and the Future

The real estate investment trust (REIT) structure has come under increasing scrutiny given the problems the structure poses for finns wishing to retain earnings in depressed real estate equity and debt markets. We estimate the net benefits of the structure to be no more than 2%-5% of industry equity market capitalization, although the benefits are […]

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