Property Tax Rates and Housing Prices: The Impact of Relatively High and Low Property Tax Rates
Anthony Pennington-Cross, Norm Miller and Michael Sklarz (2020)
In a classic article by Charles Tiebout (1956) he postulated that households would sort themselves locationally into the fiscal packages that best suits each household.[1] The fiscal package consists of property taxes on the cost side and public services, such as schools, parks, fire protection, police and so forth on the benefit side. This theory could work if we were all locationally mobile, and if we had a variety of fiscal packages to choose from within our feasible locations. According to the theory of optimal public finance, we should see local expenditures increase public services until the benefits exceed or just equal the costs. Those families willing to pay for better schools would accept higher property taxes. Those without children would select areas where schools were less of a priority. But the literature since 1956 has been mixed and the use of property taxes as a dominant source of paying for local services varies by market. Other types of taxes might be used instead, such as hotel taxes or sales taxes or local income taxes. This has made the study of the impact of property taxes on home prices difficult and may explain why the empirical results are mixed. What has made the study even more challenging is that, in some jurisdictions, property taxes vary by length of residency or length since ownership began.[2] This last topic is reviewed later in our discussion.
[1] See Charles Tiebout (1956), “A Pure Theory of Local Expenditures”, Journal of Political Economy, 64 (5): 416–424
[2] Such as Prop 13 in California, passed in 1978, where property taxes are constrained to increasing no more than 2% in any one year, independent of appreciation rates.
Norm Miller (2018)
Housing market analysis requires an understanding of both the owner occupant market and the rental market. Here we review the fundamental drivers of demand, supply as well as some dynamics affecting prices and rents. Last, housing affordability is briefly addressed from public and private perspectives.
Autonomous Cars and Real Estate Implications
Institutional Real Estate Americas (2017)
Norm Miller
Overall, the benefits of autonomous cars include less air pollution, fewer accidents, less time wasted in cars during stop-and-go traffic, and a more productive society. Although many folks we know like driving, someday it will be an option whether to even bother obtaining a driver’s license. This is already true in some cities with great public transit, but the United States has a car-centric culture, and it will take longer in most of the country for the realization to occur that our driving skills have and will be replaced by machines.
Norm Miller and Richard L. Parli (2014)
Extending the work of authors like Mueller, Pyhrr, Smith, Rosen and others on real estate cycles a definition of market equilibrium is explored. A new definition is offered identifying stable rental rates as the key indicator. Recent research on the application of the new definition is presented and a second definition – equilibrium vacancy – is proffered. Finally, possible applications for the new approach to market equilibrium analysis are presented.
Revisiting the Derivation of an Equilibrium Vacancy Rate
Journal of Real Estate Portfolio Management (2014)
Norm Miller and Richard L. Parli
Three approaches are used to derive an equilibrium vacancy rate, defined as that rate in which there is no pressure on real rents. It is clear that equilibrium vacancy rates differ by market and to some extent by cycle. This should be true for various property types as well, be there we focus on office property. Office property tends to have higher equilibrium vacancy rates compared to other property types like retail, perhaps due to lump space markets with significant friction. Friction drives the vacant space required for normal turnover and occupant moves. Once the equilibrium vacancy rate is estimated, it provides a useful trigger for rental forecasts. Here we examine nine metro markets that span the United States from East to West.
Downsizing and Workplace Trends in the Office Market
Real Estate Issues (2013)
Norm Miller
A corporate real estate manager today might say the space target for his/her firm is 150 square feet per worker or even much less. The Government Services Administration (GSA) seems to be aiming for much lower figures and even encouraging telecommuting. Who is downsizing and how fast are they downsizing in the office market? Will less space be needed? These questions are answered below.
Slicing, Dicing, and Scoping the Size of the U.S. Commercial Real Estate Market
Journal of Real Estate Portfolio Management (2010)
Andrew C. Florance, Norm Miller, Jay Spivey, and Ruijue Peng
We use a Census approach to calculate the size of the built commercial real estate market in the United States. We provide estimates of values at the summary level as of mid and late 2009 and relate these to the concentrations observed by state. This likely corresponds to the bottom of the current cycle providing a reference point for future comparisons. At least $4 trillion has been lost on commercial real estate from 2006 to early 2010. As of the end of 2009, the total value of commercial real estate, excluding parking lots, is about $11 trillion including owner-occupied property. If we eliminate the specialty property or simply use the midpoint in 2009, it is closer to $9 trillion. What is truly amazing is that for some property types, these values are about half of replacement cost.
A Cross Sectional Analysis of Cap Rates by MSA
Journal of Real Estate Research (2008)
Doina Chichernea, Norm Miller, Jeff Fisher, Michael Sklarz, and Bob White
There are a number of global factors driving capital markets and required rates of return that help to explain observed capitalization rates or “cap rates” over time, but little is known about the factors driving the geographical cross-sectional variation of these cap rates. This paper uses data from Real Capital Analytics for multifamily properties to explore several models that combine the expected influences from housing deman growth, supply constraints, liquidity risk and the interaction of these. The findings reveal a very strong and robust relation between supply constraints and cap rates, as well as evidence of capital flowing from larger markets to smaller markets in recent years. There is also weak but generally supportive evidence of influences from expected growth rates, liquidity, and other risk factors.
Retail Leasing in a Web Enabled World
Journal of Real Estate Portfolio Management (1999)
Norm Miller
As retail marketing through the Internet expands, traditional retail showrooms will take on new roles in the collection of data for use in direct marketing efforts. How will successful property managers take advantage of total connectivity to assist tenants with the new modes of marketing? In addition, how will leasing agents and owners value physical space when many sales are redirected through other modes of marketing and distribution? These questions are addressed in this article with some speculation on how real estate owners will measure and capture the true value of physical retail space.
Modernizing Appraisal Theory and Standards
Norm Miller (2019)
Students of appraisal have been taught there are three primary methods of valuation, and that we start the process of appraisal by defining the value sought after learning the purpose of the appraisal. The later part of that statement remains true, but today, there are more than three primary methods of valuation and many sub-methods that could fit under each of the primary methods. After thinking about appraisal for more than forty years and watching what the industry produces and utilizes, it is time to update what we teach students of valuation.
A New Method to Define Accuracy and Appraisals
Norm Miller and Michael Sklarz (2016)
Most users of appraisal services may presume that the certainty behind market value estimates are greater than reality suggests. What appraisers present is their conclusion of the most probable price when aiming for the traditional definition of market value. In fact, lenders must, by current regulation, provide an estimate of the loan-to-value ratio for each mortgage based on a single point value estimate, not a range.1 This regulatory practice has resulted in mortgage loans that vary quite a bit in terms of riskiness, simply because the potential uncertainty behind the value estimate is not incorporated into the lending decision in any way.
A Note on the Impact of Prop 13 on Effective Tax Rates, Turnover, and Home Prices
Norm Miller and Michael Sklarz (2016)
Prop 13 has been around since 1978 and limits annual property tax increases to no more than 2% per year while property values have increased by several times this amount resulting in much lower property taxes on long held properties. Over time, this property tax burdens are restricted to a fraction of neighbor properties, owners are dis-incentivized from selling. Florida has similar Prop 13 policy but it is 50% higher at 3% per year in a state with historically less appreciation. Other states are contemplating this policy as a way to not push homeowners out of their homes. The question addressed here is not one of equity, but rather how much does the reduction in supply of housing affect turnover and prices. We also examine actual property taxes paid, which suggests a large portion of the households are substantially benefitting from this policy. Further, we address how much does the lower property tax burden equal on a present value basis as a percentage of the total current home value. The answer is shockingly high.
Norm Miller and Richard L. Parli (2014)
Extending the work of authors like Mueller, Pyhrr, Smith, Rosen and others on real estate cycles a definition of market equilibrium is explored. A new definition is offered identifying stable rental rates as the key indicator. Recent research on the application of the new definition is presented and a second definition – equilibrium vacancy – is proffered. Finally, possible applications for the new approach to market equilibrium analysis are presented.
Integrating Real Estate Market Conditions into Home Price Forecasting Systems
Journal of Housing Research (2012)
Norm Miller and Michael Sklarz
Market condition indicators are reviewed here as candidates for improved short-term home price forecasting. Medium- to longer-term housing price primary drivers are quite well known, such as employment, income, supply constraints, and interest rates. Shorter-term forecasts with improved accuracy on turning points present a greater challenge and require the use of market condition indicators. Here we demonstrate the power of a variety of market-based variables that might be considered in any future research on short-term home price forecasting. Such research may help us better understand potential housing bubbles and turning points in market prices. As data continues to improve, we can perform such analysis across much of the United State on a near-real time basis in smaller and smaller sub-markets.
Commercial Office Markets Viewed by Price Segments over the Past 5 Years
Norm Miller and Vivek Sah (2011)
By using the variance of price range segments we are able to see price dispersion leading turning points in the market. We also observe the top and bottom price ranges as the most affected by capital market trends and distress sales.
A Cross Sectional Analysis of Cap Rates by MSA
The Journal of Real Estate Research (2008)
Doina Chichernea, Norm Miller, Jeff Fisher, Michael Sklarz, and Bob White
There are a number of global factors driving capital markets and required rates of return that help to explain observed capitalization rates or ‘‘cap rates’’ over time, but little is known about the factors driving the geographical cross-sectional variation of these cap rates. This paper uses data from Real Capital Analytics for multifamily properties to explore several models that combine the expected influences from housing demand growth, supply constraints, liquidity risk and the interaction of these. The findings reveal a very strong and robust relation between supply constraints and cap rates, as well as evidence of capital flowing from larger markets to smaller markets in recent years. There is also weak but generally supportive evidence of influences from expected growth rates, liquidity, and other risk factors.
The Academic Roots and Evolution of Real Estate Appraisal
The Appraisal Journal (2003)
Norm Miller and Sergey Markosyan
Real estate appraisal as a profession and real estate as a separate field of study in the United States are approximately one hundred years old. By reviewing the way the appraisal field has changed, we see that theory, methods, and practices continue to evolve. To survive over the long run requires constant learning and adaptation to changing sources of demand, new technology, and a shifting landscape of competition. In this article, we acknowledge some of the thought leaders in valuation, essentially those from the U.S. who built the current practice of appraisal, and those who will follow in their footsteps.
Pricing Strategies and Residential Property Selling Prices
The Journal of Real Estate Research (1987)
Norm Miller and Michael Sklarz
Research on many consumer goods has indicated that pricing strategies may influence perceptions of quality. Whether such perceptions exist for large assets like real estate, which may therefore allow strategies to influence selling prices is the subject of this study. Large high-rise centrally-located condominium data is used to test whether asking prices are an indicator of value to buyers.
Vivek Sah, Norm Miller, and Biplap Ghosh
The growing popularity of corporate social responsibility amongst firms has led to an increase in sustainable initiatives across all sectors. While there has been evidence of benefits to owners of green buildings, the impact at the firm level for such investments is not commonly known. The objective of this study is to provide evidence on the question of financial benefits from strategic initiatives aimed at increasing ownership of greener buildings. We use real estate investment trusts (REITs) as investors/owners of properties to test if management initiatives result in higher firm value. Using a proxy for green initiatives by REITs, we find evidence of positive impact on firm value as measured by Tobin’s q. Further, our results show that green REITs have a higher return on assets than their lessgreen peers. As an additional analysis, we find evidence of superior stock performance by green REITs over their non-green peers using Jensen’s alpha as a measure
Explaining LEED Concentration: Effects of Public Policy and Political Party
Journal of Sustainable Real Estate (2011)
Eugene Choi and Norm Miller
This study investigates the factors that influence the spatial concentration of Leadership in Energy and Environmental Design (LEED) certified buildings in the United States. We examine the effects of green building standards at the state level and compare these to the effects of financial incentives supported by the Energy Policy Act of 2005 on the concentration of LEED certified buildings. We find that political party has a significant effect on LEED concentration as well as economic growth rates. Federal level economic incentives seem to dominate state level requirements for more sustainable buildings that encourage new LEED certification efforts.
The Economics of Green Retrofits
Journal of Sustainable Real Estate (2012)
Nils Kok, Norm Miller, and Peter Morris
This is the first study focused on the economics of green renovations. Our findings are focused on Leadership in Energy and Environmental Design (LEED) buildings certified under the Existing Building: Operations and Maintenance (EBOM) certification scheme during the 2005–2010 period. We compare rents and occupancy rates, and investigate the types of improvements undertaken, as well as the amount of investments required. We survey building owners on the typical improvements and their attitudes towards the benefits and costs of upgrades. The findings indicate that investments in ‘‘green’’ retrofits are incorporated by the market, which is consistent with past studies that mostly focused on new construction. The findings indicate that, on average, investments in the sustainability of commercial buildings are economically viable.
The Operations Management of Green Buildings in the United States
Journal of Sustainable Real Estate (2010)
Norm Miller, Dave Pogue, Jeryldine Saville, and Charles Tu
This study examines the performance of green buildings from the operation and management perspective. Specifically, we look at the utility expenses, cleaning practices, use of energy-saving devices, and other building operation procedures of a national sample of office properties managed by CB Richard Ellis. The findings indicate that green buildings in the same are more energy-efficient than their non-green counterparts. Surprisingly, the average total opertain expenses of the green building group is higher than the non-green building group, albeit insignigicantly. Additionally, a building’s operating performance is more highly correlated with its ENERGY STAR score, and not the ENERGRY STAR label.
Green Buildings and Productivity
Journal of Sustainable Real Estate (2009)
Norm Miller, Dave Pogue, Quiana Gough, and Susan Davis
Healthier space need not be new space. In fact, some new buildings are extremely unhealthy as chemicals leach out into the air from glues, carpets, concrete, and paint. There is not reason this must be the case. The cost to provide healthier environments is modest compared to the benefits. Healthier buildings reduce sick time and increase productivity, making it easier to recruit and retain employees. The results provided here are based on a survey of over 500 tenants who have moved into either LEED or ENERGY STAR-labeled buildings managed by CB Richard Ellis (CBRE). It is part of a much larger study that includes details on operating expenses, leasing, and management available from the authors or www.josre.org.
Journal of Real Estate Portfolio Management (2008)
Norm Miller, Jay Spivey, and Andrew Florance
This study provides some comparison data on Energy Star and Leadership in Energy and Environmental Design (LEED)-certified buildings versus non-Energy Star or non-LEED-certified office property in the United States using the CoStar database. These results are promising for the benefits of investment in sustainable real estate, energy savings, and for the green movement now sweeping our society. The payoff from wise green investment is easy to justify even if it is based on purely profit motivations.
Seasonality in US Home Price Indices
Norm Miller (2017)
In prior Collateral Analytics research, we have often stated that residential housing markets are not just seasonal in terms of the volume of listings and sales over the course of a year, but housing markets also exhibit seasonality with respect to price. This price seasonality tends to be more pronounced in markets where the average climate is colder, making home searches or moves less appealing over winter months. We also have noted that seasonality exists even in markets like Honolulu or San Diego where winter weather does not inhibit home search or moves. This is a result of several factors common to all US markets including school cycles, holiday patterns, and peak hiring cycles.
How long does it take to sell a home?
Norm Miller (2019)
The answer is not as simple as “that depends on how it is priced?”, although asking price relative to market value does matter. More specifically, how long it takes to sell a home or the time on the market depends on 1) the pricing strategy, 2) market conditions, 3) the season, 4) the price range of the home, and 5) how well it is marketed. How well it is marketed is beyond the scope of the discussion here, but certainly experienced agents are better at pricing and staging a home for sale. We can address the other factors and do so here. The following sections address each of these factors in turn. Towards the end of the article we conduct some empirical tests that test how well each of these factors explain how long it takes to sell a home.
Norm Miller (2018)
Housing market analysis requires an understanding of both the owner occupant market and the rental market. Here we review the fundamental drivers of demand, supply as well as some dynamics affecting prices and rents. Last, housing affordability is briefly addressed from public and private perspectives.
The Story of Entry Level Housing Affordability in the USA Considering Price Tiers and Property Taxes
Collateral Analytics Research
Norm Miller and Michael Sklarz (2017)
Housing affordability measurements based on only median home prices and median household incomes are probably antiquated. Today, with richer data sets we can utilize more of the relevant information including segmenting the market into price tiers and considering actual property tax rates. A further refinement would consider the localized average loan to value ratio and this would help explain why Miami, FL or Sun City, NV are actually more affordable as the lower loan-to-value ratio typically used would be a way to incorporate the effect of wealth into the affordability calculation. Our results and proposed methodology are an alternative and we hope improved way to look at entry-level housing affordability.
A Note on the Impact of Prop 13 on Effective Tax Rates, Turnover, and Home Prices
Norm Miller and Michael Sklarz (2016)
Prop 13 has been around since 1978 and limits annual property tax increases to no more than 2% per year while property values have increased by several times this amount resulting in much lower property taxes on long held properties. Over time, this property tax burdens are restricted to a fraction of neighbor properties, owners are dis-incentivized from selling. Florida has similar Prop 13 policy but it is 50% higher at 3% per year in a state with historically less appreciation. Other states are contemplating this policy as a way to not push homeowners out of their homes. The question addressed here is not one of equity, but rather how much does the reduction in supply of housing affect turnover and prices. We also examine actual property taxes paid, which suggests a large portion of the households are substantially benefitting from this policy. Further, we address how much does the lower property tax burden equal on a present value basis as a percentage of the total current home value. The answer is shockingly high.
A New Method to Define Accuracy and Appraisals
Norm Miller and Michael Sklarz (2016)
Most users of appraisal services may presume that the certainty behind market value estimates are greater than reality suggests. What appraisers present is their conclusion of the most probable price when aiming for the traditional definition of market value. In fact, lenders must, by current regulation, provide an estimate of the loan-to-value ratio for each mortgage based on a single point value estimate, not a range.1 This regulatory practice has resulted in mortgage loans that vary quite a bit in terms of riskiness, simply because the potential uncertainty behind the value estimate is not incorporated into the lending decision in any way.
Is there Seasonality in Home Prices – Evidence from CBSAs
Journal of Housing Research (2013)
Norm Miller, Vivek Sah, Michael Sklarz, and Stefan Pampulov
This study detects seasonality in home prices at the Core Base Statistical Area (CBSA) level. Using a unique database of home sales from 138 CBSAs from February 2000 to April 2011, we explore if monthly home prices vary systemically and significantly. Using a hedonic pricing model to account for housing characteristics and the standard HP filter system to extract the trend and the cyclical/seasonality component for the prices, the findings indicate significant price variations during the year for most months and most markets. At the aggregate level, the monthly price changes vary from an average of -2.78% on the downside to 1.93% on the upside. Aside from weather-induced seasonality and geographic region, we find some difference in patterns based on whether or not the CBSA is a tourist destination.
A Look at Another Stage of the Distressed Inventory: The Number of Properties with Negative Equity
James Follian, Norm Miller, and Michael Sklarz (2012)
One of the major topics in today’s discussion of housing markets pertains to the role of the inventory of distressed real estate. At a high level, this inventory is hindering the full recovery of the housing market and generating substantial challenges for, current market participants. Answers or insights about these questions rest, first and foremost, upon accurate estimates of the size of the inventory and the mechanisms available to reduce the size of the distressed inventory.
Integrating Real Estate Market Conditions into Home Price Forecasting Systems
Journal of Housing Research (2012)
Norm Miller and Michael Sklarz
Market condition indicators are reviewed here as candidates for improved short-term home price forecasting. Medium- to longer-term housing price primary drivers are quite well known, such as employment, income, supply constraints, and interest rates. Shorter-term forecasts with improved accuracy on turning points present a greater challenge and require the use of market condition indicators. Here we demonstrate the power of a variety of market-based variables that might be considered in any future research on short-term home price forecasting. Such research may help us better understand potential housing bubbles and turning points in market prices. As data continues to improve, we can perform such analysis across much of the United State on a near-real time basis in smaller and smaller sub-markets.
The Impact of Distressed Sales on Frequently Used Housing Price Indexes
Norm Miller and Michael Sklarz (2009)
This fall we can expect an increase in the flow of foreclosures. Federal and California moratoriums and the hopes of loan modification have delayed the housing markets move toward normalcy. So how will this onslaught affect the housing price statistics and, in turn, the way media will play it?
Irrational Despair in the Housing Market
Norm Miller and Michael Sklarz (2008)
There seems to be a market for doom and gloom writing and reporting. Extreme views grab attention and this will never change, but our concern is that we are entering a period of contagion effects where psychology impacts the downward housing slide as much as fundamentals. And this raises a more important problem: Who is telling the truth? How accurate is the data that is being used to make these gloomy predictions? Unfortunately the consumer of real estate information is left to struggle with misinformation, exaggerations or even outright falsehoods. The housing market as discussed in the media is almost like the rhetoric of a President campaign where context is often lost.
Time Varying Trading Volume and the Economic Impact of the Housing Market
Norm Miller, Liang Peng, and Mike Sklarz (2007)
This paper empirically analyzes if trading volume in the housing market, particularly existing single family home sales, helps explain economic growth. Using a large panel data set that covers all 379 MSAs in the U.S. from 1983:1 to 2005:4, we find strong evidence that changes in home sales are significantly and positively correlated with the growth of Gross Metropolitan Product, with house prices, some local variables, as well as fixed effects and unobserved common factors controlled. Moreover, we find that the explanatory power of home sales seems to mainly come from decrease in home sales in “cold” housing markets. In a panel VAR setting, we find no evidence for home sales to be a leading indicator of GMP growth: GMP growth Granger causes home sales but home sales do not Granger cause GMP growth.
Idiosyncratic Volatility and the Housing Market
Journal of Housing Research (2006)
Norm Miller and Gurupdesh Pandher
Housing investment is largely undiversified and differs from financial assets (e.g. stocks) in that it serves the dual purpose of investment and consumption. Transaction costs and liquidity risk are also much higher for housing assets. These important differences among financial and housing assets suggest that idiosyncratic volatility may play an important role in explaining investment returns in the U.S. housing market. We evaluate this hypothesis using disaggregate housing data based on the median-priced house sale in 7,234 zip codes comprising the U.S. metropolitan housing market. The analysis also allows us to determine the extent to which systematic and non-systematic risks influence investment returns in the U.S. housing market. Idiosyncratic volatility is estimated as the standard deviation of residuals from a two-factor regression of housing returns. We find that idiosyncratic volatility plays a strong positive role in housing returns and the relation is robust to the price level and socioeconomic variation among housing submarkets. Our results suggest that idiosyncratic volatility acts as an important reduced-form factor for local supply-demand conditions that operate autonomously of systematic economy-wide drivers.
The Impact of Interest Rate and Employment on Nominal Housing Prices
International Real Estate Review (2005)
Norm Miller, Michael Sklarz, and Thomas Thibodeau
This research examines how well nominal income, nominal interest rates and employment explain temporal variation in nominal metropolitan area house prices. Rather than use a traditional model of real house prices, we explain nominal house prices with a measure of “intrinsic” house value that combines local economic factors with an affordable price based upon what the local median income household could afford to pay at prevailing interest rates. The affordable price variable captures local household income trends and current interest rates. We then relate temporal variation in observed house prices to “intrinsic” value and estimate the parameters of separate autoregressive house price models for 316 cities. Like Capozza, Hendershott and Mack (2004), and Abraham and Hendershott (1996) before them, we observe that the coastal markets exhibit much greater appreciation/ depreciation rates and much more volatility than cities in the central portions of the country. Here we focus primarily on the impact of interest rates on nominal prices in various MSAs, a factor that many housing analyst have pointed to when debating the existence of housing bubbles. Some markets are much more or less responsive to interest rates than others. Supply constraints may explain some of this increased responsiveness.
Exploring Metropolitan Housing Price Volatility
Norm Miller and Liang Peng (2004)
This paper uses MSA level data and a panel VAR model to analyze the dynamic determination and impact of the volatility of single-family home value appreciation. We find that the volatility can be magnified by an exogenous increase in the home appreciation rate, responds to changes in the population growth rate, and is serially correlated. Moreover, an exogenous increase in the volatility increases the home appreciation rate, reduces personal income growth rate and affects population growth rate. Our analysis also provides strong evidence of heterogeneity of the MSA housing markets.
U.S. Residential Brokerage Trends
Norm Miller, Natalya Delcoure (2001)
There are many sweeping changes in the way business is conducted in all industries as a result of the Internet. The real estate industry is no exception. According to the 200 National Association of Realtors Profile of Home buyers and Sellers, in 1999, 37 Percent of home-buyers used the internet as a key source of information in their home purchase process, a 19 percent increase from 1998. It appears that in 1999 the U.S. real estate industry has become more web-based despite the fact that four out of five customers used real estate agents in their home purchase process. If this trend continues, and more consumers use the internet as the primary source in their real estate information search and purchase, real estate professionals may face a decrease in commission fees and reduced demand for their services.
Optimal Price and Selling Effort from the Perspectives of the Broker and Seller
AREUEA Journal, Vol. 19, No. 1, 1991
David Geltner, Brian D. Kluger and Norman G. Miller
This paper uses numerical solutions of a dynamic optimization model to examine the principal-agent relationship between the seller and broker in residential real estate markets. Potential conflict of interest is quantified in two dimensions, the level of selling effort the broker puts forth, and the reservation price for the property. The dynamic optimization model reveals that the use of a finite duration listing contract will induce the broker to increase his or her effort level compared to an unlimited duration contract, and that the broker’s optimal effort will increase over time, becoming greater as the listing contract expiration time draws nearer (“rational procrastination”). The numerical analysis indicates that with plausible parameter values, conflict of interest problems regarding broker effort level are minor or nonexistent near the end of the listing contract, but potentially important near the beginning of the contract. In contrast, the conflict of interest regarding reservation price is more sever near the end of the listing contract and is exacerbated by the use of finite duration contracts, the more so the shorter the contract.
Measuring Residential Real Estate Liquidity
American Real Estate and Urban Economics Association Journal (1990)
Brian Kluger and Norm Miller
There are many factors, other than price alone, that may affect the liquidity of real estate. This study develops a liquidity measure based on the Cox proportional hazard technique, a statistical model widely used in the epidemiological and social sciences. The odds ratio, along with an estimate of market value for a home, are used to construct a liquidity measure. This measure can extract from the data a rich statistical profile of the variables that affect liquidity.
Japanese Purchases, Exchange Rates and Speculation in Residential Real Estate Markets
The Journal of Real Estate Research (1988)
Several luxury single-family home markets in Hawaii have experienced significant price movements in 1987 and 1988, along with a tremendous influx of Japanese buyers. Most noteworthy is the Waialae-Kahala neighborhood in Honolulu, where average price increases of over 60% in the past two years have occurred. This surge in prices has stimulated a great deal of speculative interest. The purpose of this article is to examine the effect of exchange rates (yen/dollar) and Japanese buyers on selected residential market prices and turnover. Using the most exhaustive and complete data set available in Hawaii covering 1986 through early 1988, hedonic pricing models as well as descriptive statistics are used to examine the effects of strong foreign interest in local housing sub-markets.
A Note on Leading Indicators of Housing Market Price Trends
The Journal of Real Estate Research (1986)
Norm Miller and Michael Sklarz
Most indicators of changing housing demand and supply provide signals for longer term trends. Many market participants such as mortgage lenders, speculators, real estate brokers, developers, and appraisers, would benefit if short term price trends could be better monitored and predicted. This research builds upon several simple and straightforward statistical indicators of housing market price movements to analyze either local, regional or national trends. It utilizes existing housing resale data as well as new housing market data.
Do Antitrust laws apply to the real estate brokerage industry
American Business Law Journal (1979)
Norm Miller and Peter Shedd
Since the beginning of organized real estate brokerage practice, real estate brokers have enjoyed fairly uniform commission rates. During the past decade, they have also relied heavily on their multiple listing services as a central clearinghouse and source of market information. The multiple listing service and uniform commission rates have stimulated extensive antitrust litigation. Nevertheless, legal pressures against antitrust violations have had a relatively minor impact on the real estate brokerage industry. This article examines (1) the bases for the legal issues that have been raised and (2) the economic environment as an explanation why the brokerage commission schedule has been unchanged by legal action. Two possible antitrust violations within the brokerage industry will be discussed. First, can market information gained from the multiple listing service be reserved only for the members of the local realty board who have joined the multiple listing service? Second, does the existence of uniform commission rates necessarily indicate illegal price fixing?
Time on the Market and Selling Price
Norman G. Miller (1978)
This study is primarily an analysis of tradeoff between selling time and price, both on a nominal selling price with expected selling time. The time a property remains on the market is important, not only because of its reflection on price, but also because of its possible reflection on the issue of sub-market equilibrium – and assumption in most urban price studies. The empirical results of this study shed light on how similar studies can easily misinterpret the implications of time on the market on price and how further work may be improved.
Workspace Trends in Office Space: Implications for Future Office Demand
Norm G. Miller , (2014) “Workplace trends in office space: implications for future office demand”, Journal of Corporate Real Estate, Vol. 16 Iss: 3, pp.159 – 181
Norm Miller
- Purpose– This study aims to examine the trends in space per office worker and the influence of a number of factors on the ability to reduce space per worker. These trends are important in that they impact future office demand along with property values.
- Design/methodology/approach– Using both survey and empirical data a simulation model is used to examine the impact on space per worker over the course of a typical lease. Factors considered include the length of lease, the worker growth rate of the firm, turnover and time to fill positions, the type of organizational management hierarchy, whether dedicated or non-dedicated space is utilized and firm policies toward working out of the traditional office.
- Research limitations/implications– It appears that modest economic growth is sufficient to offset downsizing trends, but some markets will be more affected than others. Portfolios dominated by larger than average tenants or U.S. Federal Government tenants will be affected much sooner by downsizing efforts compared to smaller private sector tenants. The mix of occupant types and age also matters, and this study does not delve into significant occupant-type difference by market. This study also does not directly consider design influences on productivity other than those mentioned through surveys: natural light, air quality, temperature control, noise and the presence of collaborative space.
- Practical implications– Forecasters of office space demand must input an estimate of the growth in professional employment and then apply a space per worker assumption. This assumption in most markets will be declining, by as much as 30 per cent over several years. Washington DC is already being affected by downsizing, yet most markets with reasonably good economic growth will be able to offset most of this transition to more intensively used space.
- Originality/value– This is the first paper to try and reconcile the views of commercial real estate owners and operators with those of corporate space planners, both of who have opposite sides of the same lease. It is also the first to point out the explicit reasons why downsizing efforts are sometimes not as effective as expected.
Downsizing and Workplace Trends in the Office Market
Real Estate Issues (2013)
Norm Miller
A corporate real estate manager today might say the space target for his/her firm is 150 square feet per worker or even much less. The Government Services Administration (GSA) seems to be aiming for much lower figures and even encouraging telecommuting. Who is downsizing and how fast are they downsizing in the office market? Will less office space be needed? These questions are discussed below.
Work Place Trends and Implications for Office Demand: Slides
2013
Norm Miller
