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Market Efficiency, Housing Affordability and the Real Estate “Bubble”

Market Efficiency, Housing Affordability and the Real Estate “Bubble”. Samuel Alfred Leger. Basic Idea. To develop a better understanding of the current real estate and housing markets Develop a new measure of housing affordability. Research Questions. What is driving housing appreciation?

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Market Efficiency, Housing Affordability and the Real Estate “Bubble”

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  1. Market Efficiency, Housing Affordability and the Real Estate “Bubble” Samuel Alfred Leger

  2. Basic Idea • To develop a better understanding of the current real estate and housing markets • Develop a new measure of housing affordability

  3. Research Questions • What is driving housing appreciation? • Is the real estate market staying efficient? • Is there actually a real estate “bubble”? • What can recent homebuyers do to stay afloat in an inflated real estate market?

  4. Research • Develop a measure of housing market efficiency and use this measure also to consider housing affordability • Examine housing market conditions within the Cape Fear region

  5. Information Table

  6. Research • Examine home prices, interest rates and household income to see how those variables have swayed. • Interest rates adjust to record lows • Household income and inflation were modest • Possible drivers for housing affordability

  7. Research and Process • Developing a measure of housing affordability and tracking it over a period of time • To discover any extremes in the market, either today or in the recent past.

  8. Research and Process • Considering median house prices along with the median household income; a ratio of these is developed for North Carolina with regional data • reach conclusions about the local market.

  9. Purpose • Give insight about market conditions, housing affordability and the much discussed real estate “bubble”

  10. Bibliography • Anderson, Randy and Youguo Liang., 2001, Mature and Yet Imperfect: Real Estate Capital Market Arbitrage, Journal of real Estate Portfolio Management, 7: 3, pg. 281. • Fickes, Mike., 2001, Feasting on Market Inefficiency Worldwide, National Real Estate Investor, 43: 11, pg. 26. • Geddes, Ryan., 2004, Housing Bubble Building?, Business Journal, 19: 49, pg. 1. • Guran, Lleana., 2000, Housing Opportunity Index, Housing Economics, 48: 6, pg. 3. • Liang, Youguo and Richard A. McLemore., 2004, Housing Appreciation- The Three Fundamental Drivers, Real Estate Finance, 21: 1, pg. 3. • Rex, Tom R., 2000, Housing Affordability Worsens For Low-Income Households, Arizona Business, 47:11, pg. 5. • Rex, Tom R., 2001, Housing Appreciation Varies Widely Across Nation, Arizona Business, 48: 3, pg. 1. • Wang, Peijie., 2000, Market Efficiency and Rationality in Property Investment, Journal of Real Estate Finance and Economics, 21: 2, pg 185. • Zietz, Emily N., 2003, Multifamily Housing: A review of Theory and Evidence, The Journal of Real Estate Research, 25: 2, pg 185.

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