bluuebunny/crossref_metadata_2025 huggingface dataset:
An Exploratory Study of the Innovation Evaluation Process
Authors: Olshavsky Richard W. , Spreng Richard A.
Published: October 2003

In their search for the keys to successful product innovation, product managers and researchers typically focus on trying to identify the most effective organizational processes, strategies, and structures. Surprisingly, little or no effort is directed toward understanding the process that consumers use for evaluating an innovation. By gaining insight into this evaluation process, a firm can present an innovative product in a more effective manner and thus increase the likelihood that consumers will respond favorably to the innovation.

Richard W. Olshavsky and Richard A. Spreng provide insight into this process by describing the results of an experiment in which subjects were asked to evaluate several innovative concepts. From their observations, they develop a model of the detailed information‐processing steps that these consumers employed in order to evaluate the new products.

Consistent with previous research, they found that judgment was the predominant evaluation strategy, particularly for the most innovative concepts. Various subjects also used a categorization strategy, though none used categorization for more than four of the nine concepts that were evaluated. Contrary to expectations, none of the evaluations relied solely on the manufacturer's reputation or the recommendation of a friend.

In a simplified model of the evaluation process, when presented with an innovative concept, consumers first attempt to categorize the product. In other words, an innovation may be rejected simply because consumers somehow link it to an existing category that has a negative connotation. If consumers cannot categorize the product, they then employ a judgment process based on some evaluative criteria.

Based on the data collected in this study, this simplified model is extended to include four other cognitive processes that strongly influence the evaluation process: forming evaluative criteria, forming expectations about the innovative concept, assessing satisfaction with an old product, and comparing the new and old products. When faced with a highly innovative concept, consumers may find it difficult to form their own evaluative criteria and expectations concerning that innovation. Consequently, managers may have an opportunity to shape the judgment process by educating consumers about the appropriate evaluative criteria or by clearly communicating the product's attributes, benefits, and appropriate use.
Factors Affecting New Product Success: Cross‐Country Comparisons
Authors: Mishra Sanjay , Kim Dongwook , Lee Dae Hoon
Published: October 2003

Although considerable effort has been devoted to identifying the factors that contribute to new product success and failure, plenty of work remains to be done in this area. For example, many studies of this subject focus on companies in specific parts of the world (in particular, North America, Europe, and Japan). It remains to be seen whether the findings from these studies apply to the new product development (NPD) efforts of companies in other regions, let alone on a global basis.

Sanjay Mishra, Dongwook Kim, and Dae Hoon Lee address this issue in a study of the factors that contribute to the success or failure of NPD efforts in South Korean firms. To explore the question of whether a global set of success factors can be identified, they compare their findings with those of similar studies conducted in Canada and China. Classifying these countries in terms of stages of economic development (with China and Canada at opposite extremes and Korea in the middle), they expect to find the greatest dissimilarities in their comparisons of China and Canada.

Marketing managers from 144 Korean firms provided in formation about 288 successful and unsuccessful products. Their responses indicate that the factors most closely related to new product outcomes in Korea are market intelligence, product‐firm compatibility, the nature of the new product idea (for example, whether the product idea was market derived, whether the product specifications were clearly defined by the marketplace), launch effort, and general characteristics of the new product venture (such as the product's innovativeness to the market and its technical complexity). Several of these factors were emphasized in studies of Canadian and Chinese NPD success, though respondents to those studies also highlighted the importance of the product offering and proficiency of formal NPD activities.

Contrary to expectations, China and Canada show the greatest similarity among the three countries studied, in terms of the relative importance of the various NPD success factors. On the other hand, China and Korea are more similar in terms of the effects of the variables studied. In other words, if a variable is related to new product failure in Korea, that variable is most likely also related to failure in China. Although some similarities are evident among all three countries, the findings in this study do not point toward a single, global formula for NPD success.
Technological Level and Product Development Cycle Time
Authors: Karlsson Christer , Åhlström Pär
Published: October 2003

This article investigates the link between product development cycle time and technological level in the final product, using a sample of 11 new car development projects. Reducing cycle time can create competitive advantages, but it also may lead to the development of technologically inferior products. Time is needed to digest and analyze technological problems. The conclusions from our study support the notion of a relationship between cycle time and technological level. Thus, there are important choices to be made regarding the desired level of technological maturity in the final product. This affects the required cycle time. Simply reducing the cycle time may not always be feasible or desirable
Planned Flexibility: Linking Anticipation and Reaction in Product Development Projects
Authors: Verganti Roberto
Published: October 2003

The early phases of a product development project (i.e., concept generation and product planning) are commonly acknowledged to play a central role in the success of product innovation. Early decisions are unlikely to be changed during downstream phases, unless high costs and time are experienced. They have therefore the highest influence on project performance. However, early analysis and problem solving is also a difficult task, because the necessary information and insights are not available until one gets into detailed design. Most companies are locked in this dilemma between anticipation (i.e., anticipating decisions in the early phases of product development, where influence on performance is substantial) and reaction (i.e., delaying decisions to downstream phases, where information and opportunities are manifest). This article investigates early development practices in 18 Italian and Swedish companies, operating in the vehicle, helicopter, and white‐goods industries. It shows that neither anticipation nor reaction may be considered a best practice in absolute terms. Rather, it identifies four possible approaches to manage the early phases (detailed, selective, comprehensive, and postponed), where anticipation and reaction have different balances. In addition, the article shows how anticipation and reaction are not contradictory or mutually exclusive, but strongly interact with each other through a mechanism that we call planned flexibility, i.e., the capability to build flexibility into the development process due to decisions taken early in the project.
Leadership Style: Its Impact on Cross‐Functional Product Development
Authors: Norrgren Flemming , Schaller Joseph
Published: October 2003

This article reports the results of a study in which cross‐functional product development projects in six companies were analyzed. The study was conducted as part of an interdisciplinary research involving technological, organizational, and behavioral analysis. The article draws on an excerpt of the data collected on leadership styles among project managers as well as some data on organizational climate and team learning. Leadership style, especially the leaders' employee orientation, co‐varied significantly with how members of the cross‐functional teams perceived their work climate and possibilities for innovative learning. The results of the analyses point to the leader's behavior, rather than his power, as an important factor determining the work climate in successful cross‐functional product development projects.
From Physics to Function: An Empirical Study of Research and Development Performance in the Semiconductor Industry
Authors: Iansiti Marco , West* Jonathan
Published: October 2003

We present the results of an empirical study of research and development in the semiconductor industry. The study aimed to understand the drivers of innovation performance in an environment characterized by close links to science and a combination of technical novelty and manufacturing complexity. The data reveal substantial differences in research and development (R&D) performance, and R&D performance improvement, between firms. Analysis of our field observations suggests that these differences are associated with the use of experimentation and experience in guiding technology choices, matching options provided by scientific developments with the complex requirements of evolving production environments. We describe the technology choice process in some detail, and examine its nature in both U.S. and Japanese industrial settings.
Making Innovation Happen in Organizations: Individual Creativity Mechanisms, Organizational Creativity Mechanisms or Both?
Authors: Bharadwaj Sundar , Menon Anil
Published: October 2003

Marketing managers increasingly face a product innovation dilemma. Managers will have to sell more with fewer new products in an environment where new products are providing lower revenue yields. Therefore, understanding what drives successful innovation is of paramount importance. This paper examines the organizational innovation hypothesis that innovation is a function of individual efforts and organizational systems to facilitate creativity. Our model formulates creativity as a property of thought process that can be acquired and improved through instruction and practice. In this context, individual creativity mechanisms refer to activities undertaken by individual employees within an organization to enhance their capability for developing something, which is meaningful and novel within their work environment. Organizational creativity mechanisms refer to the extent to which the organization has instituted formal approaches and tools, and provided resources to encourage meaningfully novel behaviors within the organization. Using data collected from 634 organizations, we find support for this hypothesis. The results suggest that the presence of both individual and organizational creativity mechanisms led to the highest level of innovation performance. The results also suggest that high levels of organizational creativity mechanisms (even in the presence of low levels of individual creativity) led to significantly superior innovation performance than low levels of organizational and individual creativity mechanisms. The paper also presents managerial and academic implications. This study suggests that it is not enough for organizations to hire creative people and expect the innovation performance of the firm to be superior. Similarly, it is not enough for firms to emphasize management practices to enhance creativity and ignore individual mechanisms. Although it is true that doing either will improve innovation performance, doing both should lead to higher innovation levels. Our understanding of what and how creativity influences innovation performance can be greatly enhanced by additional research that integrates the intrinsic and extrinsic drivers of creativity. Research that examines the role of team creativity efforts in enhancing innovation performance is also vital to an overall improved understanding of creativity, learning, and innovation within organizations.
Housing Costs and the Elderly
Authors: Gleeson Michael E.
Published: October 2003

Estimates are made of changes in average housing costs and average family incomes for non‐moving elderly homeowners and renters over the period 1972–80. Findings suggest that: rental costs are higher in each time period than are homeownership costs; evidence of serious deterioration in affordability of housing is weak, when looking at aggregate price/income ratios; and it is clear that elderly renters are more seriously disadvantaged in housing affordability than are elderly homeowners at every time period.
The Impact of Growth Control Regulations on Housing Prices in California*
Authors: Elliott Michael
Published: October 2003

This paper examines the impact of growth controls on the price of new single‐family homes. Four types of growth controls are discussed and each is found to have a significantly different impact on housing prices. Regulations that are imposed by one locality only are first compared to those that are imposed by a locality whose neighbors also control growth. In California, increases in house prices in communities with only local growth controls cannot be distinguished from communities that do not control growth. However, the 1969 to 1976 housing price increase in growth control jurisdictions located in extensively regulated housing markets is significantly higher than in local‐only or no‐control jurisdictions. In addition, controls that restrict the rate of development are compared to those that specify the quality of development. In the extensively regulated San Francisco Bay area, the 1969 to 1976 housing price increase was 35% higher in rate‐controlled communities and 20% higher in quality‐controlled communities than in no‐control communities.
Housing Costs and Prices Under Regional Regulation
Authors: Nicholas James C.
Published: October 2003

The regulation of development by regional agencies was proposed in the American Law Institute's Model Land Development Code. The objective of this additional regulation was to bring new development into accord with the growing concern with environmental degradation. The State of Florida was the first state to adopt its own version of the Code. This article reviews the housing cost and price impacts of this regulatory process as it has evolved in Florida. The empirical evidence suggests that both the cost and the price of new housing subject to this review are increased above that of housing exempted.
The Impact of Inclusionary Zoning on the Location and Type of Construction Activity
Authors: Clapp John M.
Published: October 2003

This paper models the impact of an inclusionary zoning ordinance on a local housing market. Markets are segmented spatially and by the mix of housing characteristics. The paper develops a framework which explains how households and builders make rational choices among alternative segments. This implies that they can react to inclusionary zoning by relocating away from the impacted sector. Therefore, the introduction of inclusionary zoning should be preceded by a study of alternative market segments. For example, the presence of attractive alternatives will allow developers and households to exit the market segments impacted by inclusionary zoning. This would cause a decline in construction activity in the covered sector.
Land‐Use Controls and Housing Costs: An Examination of San Francisco Bay Area Communities*
Authors: Dowall David E. , Landis John D.
Published: October 2003

This paper reports on our efforts to gauge the effects of land use controls on housing markets. We discuss how land use controls affect land and housing markets and explain why communities use such controls to restrict development. We present the results of an econometric model created to assess the inflationary effects of land use controls on housing costs. The model is based on data assembled in the San Francisco Bay Area. The model results indicate that density controls and land availability do systematically affect the price of new housing units.
Construction Cycles in the United States Since World War II*
Authors: Grebler Leo , Burns Leland S.
Published: October 2003

The article analyzes the cycles of total construction and its major sectors after adjustment for the varying growth trends of real expenditures. Fluctuations in GNP and business fixed investment serve as “reference cycles.” The findings elucidate the relationships between cycles in total construction and its components and between construction and GNP cycles. Special analyses are devoted to the movements of public versus private construction expenditures and to the “countercyclical” behavior of residential building. The paper shows increasing volatility of private construction over time and substantial inter‐sector differences in average volatility. Although public policies have a strong potential influence on the cyclical performance of construction, the complexities revealed in the study indicate severe problems in attempts to stabilize its output.
Competition and Efficiency in Transacting: The Case of Residential Real Estate Brokerage
Authors: Crockett John H.
Published: October 2003

This paper examines the functioning of the market for brokerage services for residential real estate. The central issue addressed is whether the manner in which brokerage services have traditionally been provided and priced is consistent with efficiency. In approaching this question, the paper first describes the activities usually associated with the brokerage function and develops criteria for the efficient provision of brokerage services. After the structural characterisitcs and pricing practices of the brokerage industry are analyzed, a model of brokerage firm competition is developed. The principal finding is that the traditional absence of price competition among brokers may have led to an inefficiently large commitment of resources to the brokerage industry, supported by excessive rates for consumers of brokerage services. These results stem from the way that competitive pressures emerge when price competition is largely suppressed.
Pricing Private Mortgage Insurance
Authors: Swan Craig
Published: October 2003

Issues involved in an evaluation of the price of private mortgage insurance are discussed. Cost considerations are emphasized as long‐run equilibrium competitive market prices equal long‐run marginal and average cost. An empirical evaluation of current insurance premiums vis‐a‐vis competitive market norms requires more empirical information on the determinants of foreclosures, especially the links between micro and macro determinants. Option pricing models suggest other data comparisons that also may shed light on an evaluation of insurance premiums.
The Interaction of Building Codes and Housing Prices
Authors: Noam Eli M.
Published: October 2003

The study analyzes the effect of restrictive building codes on the price of housing, and the simultaneous impact of housing values on the strictness of codes. A model is defined and estimated, using data for more than 1100 localities. The results show that strict codes raised housing values, in 1970, by about one thousand dollars. They furthermore show that the strictness of codes is in turn affected by housing values, as well as by the strength of construction unions. Homeowners and construction unions are thus both observed to gain from restrictive building codes, which can explain the prevalence of such regulations.
Trends in Substandard Housing 1940–1980
Authors: Clemmer Richard B. , Simonson John C.
Published: October 2003

“A decent home and a suitable living environment for every American family” has remained an elusive goal since it was first stated by Congress in the Housing Act of 1949. This owes in large part to the difficulty of translating the goal into practical definitions of housing objectives, and of developing reasonably precise estimates of U.S. housing quality, especially as these estimates may be changing over time. This paper discusses the difficulties involved in measuring housing (in)adequacy, reviews previous definitions of U.S. housing quality, and delineates a measure of housing inadequacy. Then, based upon this current measure, the numbers of inadequate housing units are calculated for 1973–1978 (years for which complete Annual Housing Survey data are available), melded with the traditional measure of “substandard” housing for the years 1940–1970, and predicted for 1979–1980 (years for which only core AHS data were currently available).

The study's principal findings are twofold:

First, The U.S. housing stock has shown a fairly steady improvement in average quality during the last forty years, a trend that appears to be continuing.

Second, while the search for better measures of housing quality must continue, HUD's current definition of physically inadequate housing represents the state of the art and, with proper calibration, provides a reasonably consistent basis for measuring U.S. housing quality over time.
The Analytical Foundations of Adjustment Grid Methods
Authors: Colwell Peter F. , Cannaday Roger E. , Wu Chunchi
Published: October 2003

Within the market data approach to real estate appraisal, two basic types of analysis generally are used: (1) regression analysis; and (2) adjustment grid methods. The focus of this paper is on the adjustment grid methods. Three such methods are identified in the appraisal literature, but their analytical foundations are not clearly presented. The primary objective of this paper is to clarify the analytical foundations of each method. In addition, various ways to estimate the adjustment factors needed to apply the grid methods and a weighting scheme for reconciliation of indicated values are presented. Also, the possible advantage of grid‐based over purely regression‐based predictions is identified.
Housing Tenure in a Model of Consumer Choice: A Simple Diagrammatic Analysis
Authors: Fallis George
Published: October 2003

The paper begins with a general model of demand for housing in an intertemporal utility maximization framework. Under standard assumptions the consumer is indifferent between owning and renting. Relaxation of various assumptions would explain tenure choice, but this is mathematically complex. As an alternative, a diagrammatic model of consumer choice over one period is presented which shows the effects of income, savings, housing and other prices, mortgage interest rates, rates of return on alternative investments, and tastes. Again under standard assumptions the consumer is indifferent about housing tenure. The effects on tenure choice of a change in the assumption about the availability of mortgage credit, rates of return on alternative investments and income taxes are demonstrated.
Real Estate Brokers and the Market for Residential Housing
Authors: Jud G. Donald
Published: October 2003

This study explores the role of the real estate broker in the housing market. A model of the demand for broker services by both sellers and buyers is developed and conditional logit estimates are presented. Evidence relating to the effects of the brokerage industry on housing market transactions also is presented. Brokers do not seem to affect the prices of the houses they sell. But they do influence the level of housing consumption by buyers.
Mortgage Lending Discrimination and the Decision to Apply: A Methodological Note
Authors: Bloom David E. , Preiss Beth , Trussell James
Published: October 2003

Previous studies of lenders' decisions to accept or reject loan applications have not accounted for the possibility that lenders discourage written applications from members of protected classes, i.e., prescreening. This paper discusses how prescreening and self‐selection may bias the measurement of discrimination. Estimation techniques are developed that test and correct for such bias whether or not information is available on non‐applicants.
The Report of the President's Commission on Housing:
Authors: Weicher John C.
Published: October 2003

This paper discusses the recommendations of the President's Commission on Housing in the area of low‐income housing policy and programs. It concentrates on the basic policy proposals concerning future program directions, which occupy the first two chapters of the Commission's Report[7]. It does not attempt to address the continuing problems of extant public housing projects, which occupied a significant fraction of the Commission's time and is the subject of Chapter 3 of the Report. Nor does it consider the special housing concerns of the elderly and handicapped, which are treated briefly in Chapter 4.

The paper first describes recent developments in housing policy, up to the time when the Commission began its deliberations, in mid‐1981. It then presents the Commission's analysis of the housing problems confronting lower‐income households and summarizes the Commission's policy recommendations. These two sections correspond roughly to the first two chapters in the report. They attempt to summarize the Report as briefly as possible, and devote more attention to the process by which the Commission reached its conclusions, and the analysis which underlay them. The final section discusses the current political status of the Commission's recommendations.
The Report of the President's Commission on Housing:
Authors: Colton Kent W.
Published: October 2003

The system of housing finance in the United States is undergoing a period of rapid transition, and many of the nation's housing problems over the last few years have related to the financing of housing. High interest rates stymied housing demand, and inflation and unprecedented movements in interest rates placed serious strains on the system of financial intermediation that successfully provided mortgage credit in the country for more than forty years. This paper discusses some of the recommendations of the President's Commission on Housing which were intended to provide a framework to assist policy makers as the nation moves toward a broader‐based, more resilient system to supply funds for housing in the future. Although the paper briefly outlines the Commission's recommendations and reviews the record regarding implementation, the primary focus is on examining the future dimensions of the nation's housing finance system.
Direct Household Assistance and Block Grants
Authors: Wallace James E.
Published: October 2003

This paper has three purposes. Most of the paper summarizes the background, rationale, and proposals on housing assistance developed by the President's Commission on Housing–a Housing Payment Program to help low‐income citizens pay housing costs in the existing housing market and a Housing Component for the Community Development Block Grant Program, A second purpose is to review some of the range of opinion on the Commission as it developed its proposals. Finally, I want to suggest that the credibility and potential support for the proposals are undermined currently by their being advanced in a climate of budget cutting for housing programs.
Summary of an Article on Reforming Land‐Use Regulations
Authors: Goldman Ellis G. , Field Charles G.
Published: October 2003

This article describes how excessive land use control adversely affects the cost of housing. Numerous studies showing the impact of over‐regulation on housing costs are cited. The article provides both a historical and philosophical context for public land use regulation and describes key judicial decisions as well as competing public and private interests that shape the regulatory environment.

Specific attention is given to the work of the Committee on Government Regulation and the Cost of Housing of the President's Commission on Housing. The various recommendations of the Commission are set forth, the central one being the enactment of state and local legislation to restrict zoning regulation to that which is necessary to achieve what the Commission terms a “vital and pressing” governmental interest. A number of other specific Commission recommendations are also enumerated including density of development, restrictions on manufactured housing, size of dwelling units, growth controls, farmland preservation, development standards and fees, and local permit processing. The article concludes with a strong statement regarding the need for public education as a prerequisite for reform.
Moderate Rent Controls: A Microeconomic and Public Choice Analysis
Authors: Mann Bruce D. , Veseth Michael
Published: October 2003

Why do people vote for (and against) moderate rent controls? The microeconomic effects of rent controls are complex–they affect both renters and homeowners in many ways, creating a complicated pattern of winners and losers. Renters stand to gain initially from the controlled rents, but competition for scarce housing dissipates these gains. Homeowners are affected by changing housing demand patterns and shifts in property tax burdens. An econometric analysis of the 1980 Seattle, Washington rent control referendum supports the conclusion that voters recognized the microeconomic gains and losses and voted accordingly on this issue. Use of census tract data makes this public choice analysis particularly strong compared to other studies that aggregate voters at the city or county level, possibly missing important intrajurisdiction voting patterns.
Tenure Decisions Under a Progressive Tax Structure
Authors: Buser Stephen A. , Sanders Anthony B.
Published: October 2003

Although certain provisions of the federal tax code provide subsidies to homeowners, others provide subsidies to renters in the form of tax incentives for investments in rental housing. We demonstrate that the renter subsidies dominate for households in low tax brackets whereas homeowner subsidies dominate for households in high tax brackets. Moreover the dollar magnitude involved in the tenure decision can easily push a household across tax brackets. Based on this relation, we identify an upper bound on the value of a dwelling that a household with a given income will prefer to own rather than rent for tax purposes. If the household were to choose a dwelling valued in excess of this household‐specific upper bound, the tax effect would reverse and favor renting. This complication provides a possible explanation for apparent tax anomalies in tenure decisions, i.e., high income renters and/or low income homeowners.
The Reaction of Landlords to Rent Control
Authors: Hohm Charles F.
Published: October 2003

Studies on rent control have generally failed to elicit attitudes and reactions of landlords to rent control ordinances. This analysis attempts to fill the gap by querying 1357 landlords in San Diego County, an area currently without rent control. As expected, almost all the landlords were opposed to rent control. The landlords were asked if actual rent control enactment would impact their investment plans and, if so, how. They also were asked if the current threat of rent control is having an impact on their investment plans and, if so, how. The vast majority of landlords responded to both of these questions in the affirmative. The various answers on type of reaction center around two themes: getting out of the apartments business and a cessation of any further investment in apartments. A discriminant analysis showed numerous variables to be related to whether landlords are reactive to rent control enactment or the threat of rent control.
Risk Analysis in Land Development
Authors: Peiser Richard B.
Published: October 2003

Land development poses a different set of risks from income‐producing property. This paper explores the nature of land development risk with particular reference to large‐scale subdivision development. Because several major variables in land development analysis are correlated, meaningful risk analysis requires that intercorrelation be explicitly recognized and incorporated into simulations. A case study is presented which demonstrates the application of risk analysis to land development and the handling of intercorrelation among random variables.
Alternative Housing Price Indices: An Evaluation
Authors: Mark Jonathan H. , Goldberg Michael A.
Published: October 2003

This paper reports on research in which eleven alternative housing price indices are constructed for two Vancouver neighbourhoods for the period from 1957 to 1979. Three criteria for good indices are presented, and the eleven indices, as well as several government and industry indices are evaluated in accordance with those criteria. It is determined that, almost surprisingly, an index based on mean sales values performs well, as do several of the hedonic price equation based indices. Several policy implications of the analysis are then discussed.
A Theoretical Basis for Hedonic Regression: A Research Primer
Authors: Edmonds Radcliffe G.
Published: October 2003

The hedonic regression, estimation of an hedonic price function, is shown to be an approximation of a multifaceted consumption possibilities frontier in characteristics space. Consequently, a linear functional form is inappropriate, included characteristics must be restricted to those which pertain to the good itself, and the estimated intercept and qualitative characteristic coefficients are easily interpretable.
The Shifting of FHA Discount Points: Actual Vs. Expectations
Authors: Smith Stanley D. , Sirmans G. Stacy
Published: October 2003

This study extends the earlier studies by Zerbst and Brueggeman (Z&B) and Colwell, Guntermann and Sirmans (CGS) with regard to the shifting of FHA discount points by the seller to the buyer in the form of a higher selling price. The study extends the earlier studies by reducing the estimation problems of the CGS model and further developing the Z&B model to incorporate expected discount points built into the asking price. The results presented indicate that 100% of the points are not being shifted. Reasons for the less‐than‐full shifting are given.
Office Rent in the Chicago CBD
Authors: Brennan Thomas P. , Cannaday Roger E. , Colwell Peter F.
Published: October 2003

This study focuses on the Chicago CBD office market, an important market at the local, regional, national and international levels. The purpose of this study is to develop a hedonic regression model that explains the variation in office rent per square foot. Five functional forms (linear, reciprocal, logarithmic, semi‐log and log‐linear) of the model are considered. A generally log‐linear model is determined to be the best model based on a series of Box‐Cox/Box‐Tidwell type transformations and likelihood ratio tests. The regression results reveal that the model has very high explanatory power. The methodology of this study differs substantially from that of previous studies on this topic. Perhaps most importantly, the unit of analysis is the office unit rather than the building. This choice suggested the use of specific lease terms for actual transactions and location of the unit within the building as new variables. Finally, the modeling of location of the building within the CBD was found to be a critical step.
Prospective Changes in Tax Law and the Value of Depreciable Real Estate
Authors: Hendershott Patric H. , Ling David C.
Published: October 2003

The Economic Recovery Tax Act of 1981 significantly reduced the taxation of income‐producing properties by accelerating tax depreciation on both new and, especially, existing properties. A partial reversal of the 1981 legislation appears likely. To provide some insight into the possible effects of a decrease in tax depreciation of income‐producing properties, two potential tax changes are analyzed: an increase from fifteen to twenty years in the tax service lives of both new and existing properties and an increase for existing properties only. Both residential and commercial/industrial properties are considered.
Real Estate Investment Funds: Performance and Portfolio Considerations
Authors: Brueggeman W. B. , Chen A. H. , Thibodeau T. G.
Published: October 2003

This paper presents the results of a study dealing with a number of issues regarding real estate investment. Utilizing a data set consisting of returns from two of the oldest, continuously operating commingled real estate funds (CREFs), questions relative to investment performance, inflation hedging attributes and diversification benefits are addressed. The methodology used in exploring these issues are variants of the traditional capital asset pricing model (CAPM), extended to consider uncertain inflation (CAPMUI) and an arbitrage pricing model in which real estate performance is judged relative to a more inclusive market index representing larger numbers of substitute investments. Finally, issues relative to portfolio performance are considered by constructing portfolios containing all possible combinations of real estate, stocks and bonds to assess the potential for diversification benefits and portfolio performance.
The Theory and Evidence on Real Estate Financial Decisions: A Review of the Issues
Authors: Jaffe Austin J. , Sirmans C. F.
Published: October 2003

There has developed a growing body of literature, both theoretically and empirically based, on real estate financial decisions. Despite these advances, there are a number of important issues that remain unanswered. The purpose of this paper is to provide a review and analysis of where research on real estate financial decisions has been, where it stands today, and where it is likely to be headed in the future. Some of the unresolved issues in real estate investment analysis are also discussed. The hope is that this review will provide the stimulus for solving some of these complex issues.
Creative Financing and House Prices: A Theoretical Inquiry into the Capitalization Issue
Authors: Brueckner Jan K.
Published: October 2003

Since buyers offer a premium for access to creative financing (CF), creatively‐financed houses will sell for more than otherwise identical houses purchased with standard financing. A commonly suggested method for adjusting house values to eliminate the effects of CF is the “cash equivalence” method, where the CF premium is assumed to equal the present value of savings from CF. This paper shows that in a world with active housing speculators, the cash equivalence approach gives the right answer: In an “arbitrage” equilibrium, house values must differ by exactly the present value of CF savings. Further analysis shows that when capital markets are perfect, each consumer is indifferent between CF and standard financing when arbitrage equilibrium obtains. Without perfect capital markets, however, consumers will strictly prefer one financing mode or the other.
Condominium Conversion and the Tax Reform Acts of 1969 and 1976
Authors: Whinihan Michael J.
Published: October 2003

Condominium conversions became a major factor in housing markets durig the 1970s. The analysis presented in this paper suggests that rental housing investors are in high marginal tax brackets and use rental housing tax losses to shelter other income. These characteristics imply that rental housing tax benefits are an important determinant of rental housing investment. The Tax Reform Act of 1969 and 1976 reduced rental housing tax benefits and may have provided an important stimulus for the condominium conversions of the 1970s. Tax and survey data confirm the predicted characteristics of rental‐housing investors. Estimates of rental flows in Chicago from 1962 to 1977 indicate that the Tax Reform Act of 1969 and 1976 were possible causes of condominium conversions during the 1970s.
The Financial Stakes in Due‐On‐Sale: The Case of California's State‐Chartered Savings and Loans
Authors: Ozanne Larry
Published: October 2003

On August 25, 1978 the California Supreme Court ruled that enforcement of due‐on‐sale clauses unduly restricts the right of homeowners to sell their homes. On June 28, 1982, the U.S. Supreme Court ruled that the Federal Home Loan Bank Board could permit due‐on‐sale enforcement because such enforcement was important to the financial stability of savings and loans. Both courts' decisions, though contrary in their effect on the clause, are based on the economic importance of the clause. Just how important is the clause? This paper calculates how much money the 1978 California decision (Wellenkamp) transferred from affected savings and loans to homebuyers. The yearly transfer by 1981 is estimated at between $58 and $170 million. For the lenders, this amounts to between a tenth and a quarter of total 1981 losses. For affected homebuyers, the savings average 25% of mortgage interest payments. On the basis of these calculations, both courts are correct about the importance of the clause.
Analysis of the Characteristics of Individual Investors in Real Estate Securities and Income‐Producing Property
Authors: Srivastava Rajendra K. , Isakson Hans R. , Price Linda , McInish Thomas H.
Published: October 2003

Analysis of the responses to a nationwide survey of investors demonstrates that individuals who invest in real estate differ in a predictable way from those who invest in assets other than real estate. Two types of real estate investment vehicles are studied: income‐producing (rental) property and real estate securities. A multiple group discriminant analysis model is presented which successfully classifies prospective investors into four groups (owners of income property only, real estate securities only, both, neither) with a predictive accuracy more than double the chance probability of correct classification. The results provide insights useful in policy analysis and the design and marketing of real estate investments.
American Real Estate and Urban Economics a Canadian Perspective
Authors: Goldberg Michael A.
Published: October 2003

AREUEA membership spans both the United States and Canada and there is a tendency to homogenize real estate and urban economics into a “North American” cauldron. However, Canadian and American real estate markets, and the cities within which they operate, differ in fundamental ways. If we are to develop appropriate means for analyzing real estate and financial markets in these two countries it is imperative that we understand the underlying differences between American and Canadian cities. This paper sets out in summary form some of the differences that have been identified to date, differences that relate not only to the cities in the two nations, but to the broader cultural and institutional underpinnings as well.
Public Information and Abnormal Returns in Real Estate Investment
Authors: Gau George W.
Published: October 2003

This study performs empirical tests of the semistrong form efficiency of a real estate investment market. An asset pricing model is utilized to estimate the abnormal returns resulting from two types of public information, major changes in government tax shelter and rent control policies as well as unanticipated changes in interest rates. In both cases the results find an absence of significant abnormal returns and no evidence to suggest that real estate investors can utilize information concerning government policy changes or interest rate movements to earn higher returns on a risk‐adjusted basis. In general the findings of this study conform to the semistrong form version of the efficient markets hypothesis.
The Effects of Assumption Financing Across Housing Price Categories
Authors: Agarwal Vinod B. , Philips Richard A.
Published: October 2003

This study employs a standard housing valuation model to analyze the capitalization of below‐market financing across housing price categories. The study also investigates the effect of secondary financing on housing prices and the effect of the expected holding period on discount capitalization. Using a randomly selected sample of 1981–82 housing transactions the study finds: the discount associated with below‐market financing is inversely related to the absolute level of housing prices; secondary financing bears no systematic relationship to housing values; and discount capitalization is inversely related to the expected holding period.
Rational Pricing of Adjustable Rate Mortgages
Authors: Kau James B. , Keenan Donald C. , Muller Walter J. , Epperson James F.
Published: October 2003

In this paper we develop a general method for valuing adjustable rate mortgages and by producing a set of simulation results, we show that our approach can be implemented. While the simulations are of interest in their own right, we view the approach itself as the major contribution of the paper.
The Investment Performance of Real Estate Limited Partnerships
Authors: Rogers Ronald C. , Owers James E.
Published: October 2003

Real estate limited partnerships have become an increasingly popular form of investment over the past decade. Many investors have been drawn to these investment vehicles because of the high claimed rates of return earned by investors in previous partnerships. However, there has been little analysis of the historical rates of return on these investments other than that provided by the syndicators in offering prospectuses. This paper examines the returns earned by investors in real estate limited partnerships over the past decade. These results are compared with previous studies of the investment performance of real estate. Because of the importance of the tax shield aspects of these investments, we calculate the after‐tax rate of return for investors in several marginal tax brackets.
Rate Level Indexed Mortgages: An Evaluation
Authors: Harris John M. , Page Daniel E.
Published: October 2003

In this paper, a new and superior alternative mortgage design is presented and evaluated. The mortgage design is motivated by a desire to reduce the exposure of both borrowers and lenders to risks that result from high and variable interest rates, while at the same time providing a mechanism by which changes in the real value of payments and rates of amortization can be controlled. In addition to a theoretical discussion of the merits of this design a simulation of the mortgage's performance is provided that uses market data from the period 1965 to 1983.
Determinants of GNMA Mortgage Prices
Authors: Brennan Michael J. , Schwartz Eduardo S.
Published: October 2003

This paper contrasts three different arbitrage‐based models for the pricing of GNMA securities, and analyzes the effect of different assumptions about the call policy pursued by the issuers of the underlying mortgages. Both the nature of the interest‐rate uncertainty captured by the model and the assumed call policy have a major effect on the yield differentials predicted between GNMA securities and Treasury Bonds.
Valuing the Mortgage Borrower's Prepayment Option
Authors: Hall Arden R.
Published: October 2003

This paper investigates the value of the prepayment option that normally accompanies a fixed‐rate mortgage. Using the two‐state option‐pricing model developed by Bartter and Rendleman, the paper presents simulations of prepayment option values using several sets of interest rate parameters. The sensitivity of the value of the option to changes in various aspects of the mortgage contract is assessed. Prepayments are not priced separately in the market from the underlying mortgage, so the paper investigates how the inclusion of a prepayment option affects the contract interest rate. Finally, there is reason to believe that any option‐pricing model will overestimate the value of a mortgage prepayment option. The size of this bias is assessed indirectly and is found to be rather small.