ResearchReal Estate is one of the largest asset classes in the world and is the single largest asset in household’s portfolios. The financing of real estate underwent a financial revolution with the growth of securitization and structured finance. During the global financial crisis, banks’ real estate and structured finance exposure was the core of problem, not just in the United States, but worldwide. Today, the Spanish and Irish economies face major real estate-related financial sector issues. In the U.S., the collapse and government conservatorship of Freddie Mac and Fannie Mae precedes major reform in the architecture of mortgage finance. The Dodd-Frank Act and its ongoing implementation will reshape the future of structured finance. Foreclosures stall the recovery in housing markets and the question of whether property prices will double-dip remains as acute today as last year.
While a great deal of attention has been focused on the dramatic and ongoing issues in residential real estate, commercial real estate deserved co-equal academic attention. The commercial real estate industry represents a critical part of the macroeconomy in terms of value-added and employment, investment and growth. Academically it cuts across a broad array of disciplines ranging from location economics and financial structure to accounting, tax, marketing and management.
These developments on the ground in the residential as well as commercial domains have spawned a renaissance of good research in real estate. Formerly, a niche and a separate “field,” some of the best minds in economics and finance are turning to real-estate related questions. How important was financial market liberalization in the mortgage market for the boom-bust in house prices? How important were the low interest rates, in part from accommodative monetary policy in part caused by high savings rates in Asia? What should the future architecture of U.S. mortgage markets look like? Should there be a government guarantee for mortgages? How large should the role of the government in the housing market be? What would be the implications of a reform of mortgage interest rate deductibility for property prices? What explains the large cross-country differences in housing market architecture across developed countries? What system is most resilient? What explains regional differences in house prices in the US? Does foreclosure mitigation work and how to set it up to give it the best chance? Will private-label securitization resurge, and what are the most important changes that will make this happen? What are some of the unique issues involved in applying corporate finance and financial instruments such as securitization and structured transactions to commercial real estate?
NYU faculty has already contributed several answers to these and other real estate-related questions. We have a group of eminent scholars who study real estate, both from the financial market and from the urban economics perspective.