Wayne R. Archer

Determinants of Location for General Purpose Office Firms within Medium Size Cities

This study examines determinants of the downtown/non-downtown location choice for general purpose rental office users. It presents a model of location choice which accounts for linkages, personnel commuting costs and location of market centroid. It fits the model to survey data on office space usage, distinguishing between market oriented and non-market oriented firms.The study finds that market oriented firms are primarily sensitive to market location, while non-market oriented firms are more sensitive to linkages and personnel commuting costs. It also finds that linkages play a limited role in the location decisions even for non-market oriented offices because, in the medium size cities studied, few firms are linkage intensive. Copyright American Real Estate and Urban Economics Association.

Residential Mortgage Default: The Roles of House Price Volatility, Euphoria and the Borrower’s Put Option

House price volatility; lender and borrower perception of price trends, loan and property features; and the borrower’s put option are integrated in a model of residential mortgage default. These dimensions of the default problem have, to our knowledge, not previously been considered altogether within the same investigation framework. We rely on a sample of individual mortgage loans for twenty counties in Florida, over the period 2001 through 2008, third quarter, with housing price performance obtained from repeat sales analysis of individual transactions. The results from the analysis strongly confirm the significance of the borrower’s put as an operative factor in default. At the same time, the results provide convincing evidence that the experience in Florida is in part driven by lenders and purchasers exhibiting euphoric behavior such that in markets with higher price appreciation there is a willingness to accept recent prior performance as an indicator of future risk. This connection illustrates a familiar moral hazard in the housing market due to the limited information about future prices.

Household Income, Termination Risk and Mortgage Pricing

The premium embedded in home mortgage loans to compensate investors for their exposure to prepayment risk is a significant component of the cost of home mortgage lending. Moreover, there is some reason to believe that prepayment risk may be lower for loans to lower-income housing borrowers, especially those that are first-time home owners. If so, investor recognition of this advantage should facilitate greater willingness to acquire portfolios of lower-income housing loans, and encourage more competitive pricing in this segment of the market. This study investigates the possibility of differential mortgage prepayment behavior between lower-income home owners and non-low income home owners. The investigation relies on samples of the American Housing Survey spanning ten years of experience from 1985 to 1995. We find no significant difference between the termination or refinancing behavior of non-low income and low-income households. This result is robust to a number of alternative specifications such as restricting the low-income test group to non-moving households and to first-time owners. The same conclusions are derived from both aggregate prepayment rates and from analysis of individual household prepayment behavior.

Real Estate Brokerage, Homebuyer Training, and Homeownership Sustainability for Housing Assistance Programs

This study examines a previously overlooked factor in the rate of default on home loans by marginal first-time homebuyers; namely, the purchase transaction process. In particular, the study examines the potential for the type of initial contact in a homebuyer assistance program to affect the likelihood of default on a subsequent home loan. Using data from 41 state funded local assistance programs in Florida, the study is able to examine the relationship of program default rates to the source of applicant for assistance. Specifically, it examines the explanatory capacity of the percentage of applicants who had a contract to purchase prior to applying for assistance, indicated that the applicant already has engaged with a broker or lender. It finds that the percentage of applicants for assistance who already have engaged with a broker or lender is very significantly and positively relate to the program default rate.

Zero Coupon Syndicates and the Timing of Cash Distributions to Partnership Investors

Examines the practise of using zero coupon first mortgage notes to raise more capital than is needed to fund a particular real estate limited partnership. Explains the mechanism, with advantages and drawbacks. Provides a worked example.

An Insurance Approach to Risk Analysis of Debt Home Equity Conversion Programs

The use of home equity conversion debt creates a compounding obligation against the home that makes collateral deficiency a potentially dominant risk. Using an insurance methodology, an examination of this risk and its impact upon the potential for home equity conversion is conducted. The paper includes a consideration of how deficiency risk and maximum potential benefits are affected by the interaction of household characteristics with demographic and economic factors. Copyright American Real Estate and Urban Economics Association.