Real Estate Economics, Econ 156
Spring 2008
Fred E. Foldvary
Santa Clara UniversitySyllabus
Class web site:
http://www.foldvary.net/econ156.html
MWF, 9:15-10:20, Kenna 111, 5 units, #38945
Telephone: office 408/554-6968; home 510/843-0248. Office: Kenna 209.
Please do not call my home telephone after 10 PM.
Office hours: Wednesday & Friday 10:30- 11:30 AM; and by appointment
Fax (econ dept.) 408/554-2331. Mailbox is in the Department of Economics, Kenna 300.
e-mail: ffoldvary@scu.edu with “econ 156" on the subject line
Please do not email me any attachments; I do not open them. Do not email me any problem sets; they must be on paper.
If you cannot come to class, then place assignments in my mailbox at the Dept. Of Economics, Kenna 3rd floor. Also note that I usually do not read email late in the evening, so messages sent late in the day may not be read until morning.
Course overview:
1. Real estate is a major industry. Among the fields in which business students may be employed are real-estate management, sales, appraisal, construction, and investment.
2. Real estate plays a major role in the economy. Most of the capital stock (plus land value) is in real estate. About 25% of investment is directly in real estate, and many durable goods are connected to real estate. Real-estate prices and construction are an important element of the business cycle.
3. All of us have to live and work some place, and many people have an interest in the price of housing, how mortgages work, and various ways of investing in real estate. Every enterprise uses real estate, which constitutes a major cost.
4. Real estate impacts communities and government, and a study of real estate helps one better understand urban economics, public finance, and policy issues such as zoning.
The objectives of the course:
1. A lifetime intuitive understanding of the basic principles of real-estate economics so that you achieve economic enlightenment and sophistication.
2. The ability to analyze real-estate policy and distinguish good from bad economic thinking.
3. The ability to apply economic concepts to your own life as a resident, citizen, and investor.
Biographical sketch:
Fred E. Foldvary received his B.A. in economics from the University of California at Berkeley, and his M.A. and Ph.D. in economics from George Mason University, Virginia. Dr. Foldvary is the author of several books, including Public Goods and Private Communities and Depression of 2008. His areas of research include public finance, governance theory, economic philosophy, and the economics of real estate.
Grades and the criteria for evaluating your work.
The maximum points for each category are:
First midterm exam: 144 points (24 questions)
Second midterm exam: 144 points “
Third midterm exam: 144 points “
Final exam: 288 points (48 questions)
Term paper 60 points
Quizzes, problem sets, reports 200 points
Conversation and oral exam 20 points
total = 1000 points.
There will be an conversation and oral exam in my office. You don’t need to prepare for it. It will usually last about 5 minutes. These conversations will help me get to know you better and see how you are developing your economic understanding. The term paper will be graded in stages: outline and first, second, final drafts.
The class grading is as follows.
A : 921-999, A-: 900-920, B+: 880-899, B : 821-879; B-: 800-820; C+: 780-799,
C : 721-779, C-: 700-720; D+: 680-699; D : 621-679; D-: 600-620; F : 0-599
Essays are graded by the following criteria:
1) presentation (language, legibility, organization);
2) how completely it covers the topics;
3) focus (avoiding irrelevancies and redundancies);
4) knowledge of the relevant theory, facts, and terms, and defining of key terms;
5) warranting (by clear, sound, organized reasoning) and citing of sources.
Attendance and closing dates
The class starts exactly on time. There may be a timed quiz at the start of class. If you are unable to attend class and on time, contact me by e-mail, fax, or letter. Make-up midterms must be scheduled before the midterm date unless there is some emergency. Assignments must be submitted when due, otherwise there is no credit, unless you have arranged otherwise. Papers submitted up to 2 days late will receive a 20% score markdown.
Classroom protocols
In class, turn off cell phones, pagers, and other noisy electronic devices. Laptop computers and audio recorders are permitted during lectures so long as they are silent.
For exams, simple calculators are permitted, but it is not permitted to use laptops or devices that can communicate with others.
Academic integrity: You are expected to work in accord with principles of integrity. See:
http://www.scu.edu/studentlife/resources/academicintegrity/index.cfm
Once you have started an assignment, do not show it or discuss it with any other student. If you share space with other students, it is your responsibility to secure your assignments.
Textbook and other readings
Charles Floyd and Marcus Allen. 9th ed., 2008. Real Estate Principles.
Edrin Adrian, “Why is Housing so Expensive in Silicon Valley?”
<http://www.scu.edu/csi/SV_Housing.pdf>
Fred Foldvary, The Ultimate Tax Reform <http://www.foldvary.net/works/policystudy.pdf>
Fred Foldvary, The Depression of 2008 <http://www.foldvary.net/works/dep08.pdf>
Fred Foldvary, “Proprietary Communities and community associations.”
<http://www.foldvary.net/works/pgpc08.pdf>
Topics and Reading Assignments
Week 1. March 31+ . Chapters 1, 2
Land as a factor of production and as a natural resource. Land rent. Supply and demand.
The real estate industry. Property rights and legal descriptions.
Econometrics and regression analysis
Week 2. April 7+. Chapters 3,4
Foldvary, Ultimate Tax Reform
Restrictions on ownership. Eminent domain and takings. Property taxes. Quantum leap effect.
Adrian: “Why is Housing so Expensive”
Week 3. April 14+ Chapters 5-7.
Buying a house.
Deeds and leases. Contracts. Titles and closing.
Week 4. April 21+ Foldvary, “Proprietary communities” and associations.
First midterm, April 21.
The theory of clubs and club goods. Condominiums, residential (homeowner) associations,
Land trusts, time-shared ownership.
Week 5. April 28+ Chapters 8- 10
Brokerage, Appraisal, Management
Week 6. May 5+ Chapters 11-14
Residential land use. Home purchase decisions. Commercial and industrial real estate.
Week 7. May 12 + Chapter 15
Second midterm, May 12
Urban and regional economics
Social problems such as slums, urban decay, sprawl, and traffic congestion.
The provision of streets, parks, street lighting, public recreation, and street architecture.
The provision of utilities such as water, electricity, gas, and communications.
Week 8. May 19+ Chapters 16-18
Financing, Returns, Mortgages
First draft, term paper, due May 19.
Week 9. May 28+ Chapter 19
Income-producing property. Investing in real estate stocks.
Limited partnerships, REITs (real estate investment trusts), and mutual funds.
Real estate as an element of diversified asset categories in modern portfolio theory.
Third midterm, May 30
Week 10. June 2+ Foldvary, Depression of 2008.
Final draft, term paper and book review due June 2.
Real estate cycles. The role of real estate in the business cycle.
Final exam: Thursday, June 12, 1:30-4:40