Syllabus

Course Meeting Times

Lectures: 2 sessions / week, 1.5 hours / session

Recitations: 1 session / week, 1.5 hours / session

Course Information

This course applies the latest economic thinking and research to the task of analyzing real estate market fundamentals, forecasting supply and demand, and choosing locations. In addition to the two weekly lectures and assigned readings, the course involves 5 largely computer-based exercises (30% of grade), and a midterm and final exam (each 35% of grade). The exams are 1.5 hours each and cover material in each half of the course.

There are two types of course materials. First, there will be 12 lecture note files that represent the material in the lectures (see outline below). This material represents a significant update and expansion of the following text:

DiPasquale, Denise, and William Wheaton. Urban Economics and Real Estate Markets. Upper Saddle River, NJ: Prentice Hall, 1995. ISBN: 9780132252447.

The lecture files will enable students to cover the material without purchase of the text. Second, there is a set of journal articles that are required reading; see the readings section.

Course Outline

I. Introduction

  1. The real estate sector: the capital and property markets
    1. Review of economic concepts
  2. Micro- and macroeconomic analysis
  3. Exercise: Comparative statics: predicting changes in real estate markets

II. Residential Land Markets: Prices and Land Use

  1. Location and rents: the indifference principle
  2. Submarkets and land use segregation
  3. Urban growth, rents, and prices

III. Residential Development

  1. The highest use for residential development
  2. Location, land use, and density
  3. Transition between land uses (gentrification)
  4. Exercise: Determining optimal housing FAR

IV. Industrial Location

  1. Historical development and changing technology
  2. Transportation and shipping costs
  3. Tax and public policy effects

V. Office Location: Edge Cities

  1. The office market and the labor market
  2. Theories of multiple centered cities
    1. Agglomeration and clustering
    2. The commercial land market

VI. Retail Development

  1. Retail travel patterns and the distribution of stores
  2. Pricing and spatial competition
  3. Shopping centers and store clustering
  4. Exercise: Simulating potential shopping center demand

VII. Local Government and Land Markets

  1. Property taxes, public expenditure, and local services
  2. Community choice, "capitalization", and income segregation
  3. The fiscal incentives for land use regulation

Midterm exam: on material in sections I-VI

VIII. Regulating Development

  1. Public goods and "neighborhood" effects
  2. Internalizing external effects through government or contracts
  3. Congestion, transportation infrastructure, planning regional development
  4. Exercise: Evaluating the Washington DC Metro

IX. Macro Analysis of Housing

  1. Units, households, and tenure choice
    1. Demographic, economic influences
  2. Housing appreciation, mortgages, and the cost of owning
  3. Moving, vacancy, and sales: the demand for housing quality

X. Macro Analysis of Non-residential Property

  1. The operation of non-residential markets
    1. Vacancy, absorption, market frictions
    2. Leasing, term structures
  2. Long-term trends in space usage and demand
  3. Herd behavior and development "games"

XI. Time Series Analysis of Real Estate Markets

  1. The time-series properties of housing and commercial space markets
  2. Stock-flow theory and real estate cycles
  3. Expectations, information, "efficient markets"
  4. The issue: Can markets be forecast?
  5. Exercise: Developing a housing market forecast

XII. Regional Growth and Real Estate Markets

  1. The determinants of metropolitan growth
    1. Export demand and industrial development
    2. Birth rates, migration, and wages
  2. A model analyzing metropolitan growth
    1. Demand and supply shocks, real estate, and the cost of living

Final exam: on material in sections VII-XII