Title

Modeling the Housing Market’s Decline: How Much, How Fast, and What People Value

Format

Oral Presentation

Faculty Mentor Name

J. Farley Staneic

Abstract/Artist Statement

One of the most severe threats to the U.S. economy is the current credit crisis that was sparked by the collapse of the sub-prime housing market. This collapse has spread to affect the housing market as a whole and has left many families unable to sell their homes, some falling into foreclosure, others getting stuck with two or more mortgages, and most watching the value of their most important asset- their home- fall sharply. It is important to examine this decline to obtain insight into when the decline began, how sharp the decline was, and whether or not there are signs of the decline slowing or reversing. This study attempts to examine the decline in the housing market in Modesto, CA- one of the hardest-hit communities in terms of foreclosures and unsold inventory in the country. Typical housing market research is done using multivariate hedonic regression models. As such, this study employs a hedonic log-lin model using data obtained from the MLS on 6500 homes sold between April2005 and March 2008. This model controls for many standard variables included in typical housing research, but includes some unique variables for items such as Home Owner's Association (HOA), HOA dues, and Real Estate Owned (foreclosed) homes. Initial findings reproduce the decline in housing prices and show that the most recent quarter shows an increased loss in value over the previous quarter, with prices peaking in the first half of2006.

Location

Wendell Phillips Center, Room 149

Start Date

3-5-2008 9:00 AM

End Date

3-5-2008 12:30 PM

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May 3rd, 9:00 AM May 3rd, 12:30 PM

Modeling the Housing Market’s Decline: How Much, How Fast, and What People Value

Wendell Phillips Center, Room 149

One of the most severe threats to the U.S. economy is the current credit crisis that was sparked by the collapse of the sub-prime housing market. This collapse has spread to affect the housing market as a whole and has left many families unable to sell their homes, some falling into foreclosure, others getting stuck with two or more mortgages, and most watching the value of their most important asset- their home- fall sharply. It is important to examine this decline to obtain insight into when the decline began, how sharp the decline was, and whether or not there are signs of the decline slowing or reversing. This study attempts to examine the decline in the housing market in Modesto, CA- one of the hardest-hit communities in terms of foreclosures and unsold inventory in the country. Typical housing market research is done using multivariate hedonic regression models. As such, this study employs a hedonic log-lin model using data obtained from the MLS on 6500 homes sold between April2005 and March 2008. This model controls for many standard variables included in typical housing research, but includes some unique variables for items such as Home Owner's Association (HOA), HOA dues, and Real Estate Owned (foreclosed) homes. Initial findings reproduce the decline in housing prices and show that the most recent quarter shows an increased loss in value over the previous quarter, with prices peaking in the first half of2006.