Advanced Search
MyIDEAS: Login to save this paper or follow this series

Asset price declines and real estate market illiquidity: evidence from Japanese land values

Contents:

Author Info

  • John Krainer
  • Mark Spiegel
  • Nobuyoshi Yamori

Abstract

We develop an overlapping generations model of the real estate market in which search frictions and a debt overhang combine to generate price persistence and illiquidity. Illiquidity stems from heterogeneity in agent real estate valuations. The variance of agent valuations determines how quickly prices adjust following a shock to fundamentals. We examine the predictions of the model by studying price depreciation in Japanese land values subsequent to the 1990 stock market crash. Commercial land values fell much more quickly than residential land values. As we would posit that the variance of buyer valuations would be greater for residential real estate than for commercial real estate, this model matches the Japanese experience.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.frbsf.org/economic-research/files/wp04-16bk.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Federal Reserve Bank of San Francisco in its series Working Paper Series with number 2004-16.

as in new window
Length:
Date of creation: 2005
Date of revision:
Handle: RePEc:fip:fedfwp:2004-16

Contact details of provider:
Postal: P.O. Box 7702, San Francisco, CA 94120-7702
Phone: (415) 974-2000
Fax: (415) 974-3333
Email:
Web page: http://www.frbsf.org/
More information through EDIRC

Order Information:
Email:

Related research

Keywords: Real property ; Prices ; Japan;

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Malpezzi, Stephen, 1999. "A Simple Error Correction Model of House Prices," Journal of Housing Economics, Elsevier, Elsevier, vol. 8(1), pages 27-62, March.
  2. Kanemoto, Yoshitsugu, 1997. "The housing question in Japan," Regional Science and Urban Economics, Elsevier, vol. 27(6), pages 613-641, November.
  3. David Kelly & Stephen LeRoy, 2007. "Liquidity and Liquidation," Economic Theory, Springer, Springer, vol. 31(3), pages 553-572, June.
  4. Owen Lamont & Jeremy C. Stein, 1997. "Leverage and House-Price Dynamics in U.S. Cities," NBER Working Papers 5961, National Bureau of Economic Research, Inc.
  5. Kamhon Kan & Sunny Kai-sun Kwong & Charles Ka-yui Leung, 2002. "The Dynamics and Volatility of Commercial and Residential Property Prices: Theory and Evidence," Departmental Working Papers, Chinese University of Hong Kong, Department of Economics _147, Chinese University of Hong Kong, Department of Economics.
  6. David Genesove & Christopher Mayer, 2001. "Loss Aversion And Seller Behavior: Evidence From The Housing Market," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 116(4), pages 1233-1260, November.
  7. Krainer, John, 2001. "A Theory of Liquidity in Residential Real Estate Markets," Journal of Urban Economics, Elsevier, vol. 49(1), pages 32-53, January.
  8. Fumio Hayashi, 1989. "Is Japan's saving rate high?," Quarterly Review, Federal Reserve Bank of Minneapolis, Federal Reserve Bank of Minneapolis, issue Spr, pages 3-9.
  9. Yukio Noguchi, 1994. "Land Prices and House Prices in Japan," NBER Chapters, in: Housing Markets in the United States and Japan, pages 11-28 National Bureau of Economic Research, Inc.
  10. Stein, Jeremy C, 1995. "Prices and Trading Volume in the Housing Market: A Model with Down-Payment Effects," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 110(2), pages 379-406, May.
  11. John Krainer & Stephen F. LeRoy, 2002. "Equilibrium valuation of illiquid assets," Economic Theory, Springer, Springer, vol. 19(2), pages 223-242.
  12. Dennis R. Capozza & Patric H. Hendershott & Charlotte Mack, 2004. "An Anatomy of Price Dynamics in Illiquid Markets: Analysis and Evidence from Local Housing Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 32(1), pages 1-32, 03.
  13. Genesove, David & Mayer, Christopher J, 1997. "Equity and Time to Sale in the Real Estate Market," American Economic Review, American Economic Association, vol. 87(3), pages 255-69, June.
  14. Williams, Joseph T, 1995. "Pricing Real Assets with Costly Search," Review of Financial Studies, Society for Financial Studies, vol. 8(1), pages 55-90.
  15. Horioka, Charles Yuji, 1988. "Saving for housing purchase in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 2(3), pages 351-384, September.
  16. Hoshi, Takeo, 2001. "What Happened to Japanese Banks?," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, Institute for Monetary and Economic Studies, Bank of Japan, vol. 19(1), pages 1-29, February.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Jim Clayton & Greg MacKinnon & Liang Peng, 2008. "Time Variation of Liquidity in the Private Real Estate Market: An Empirical Investigation," Journal of Real Estate Research, American Real Estate Society, American Real Estate Society, vol. 30(2), pages 125-160.
  2. Eloisa T Glindro & Tientip Subhanij & Jessica Szeto & Haibin Zhu, 2008. "Are Asia-Pacific Housing Prices Too High For Comfort?," Working Papers 2008-11, Economic Research Department, Bank of Thailand.
  3. Eloisa T Glindro & Tientip Subhanij & Jessica Szeto & Haibin Zhu, 2008. "Determinants of house prices in nine Asia-Pacific economies," BIS Working Papers 263, Bank for International Settlements.
  4. Eloisa T Glindro & Tientip Subhanij & Jessica Szeto & Haibin Zhu, 2010. "Determinants of house prices in nine Asia-Pacific economies," BIS Papers chapters, in: Bank for International Settlements (ed.), The international financial crisis and policy challenges in Asia and the Pacific, volume 52, pages 340-370 Bank for International Settlements.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:fip:fedfwp:2004-16. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Diane Rosenberger).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.