Capitalization of Above Market Financing: Condos and Co-ops
Prices and characteristics were collected for two similar, adjacent buildings. One building, a co-op, has a master mortgage with a prepayment lock-out, while the other building, a condo, has no master mortgage. They provide a natural experiment to isolate the capitalization of financing terms. The research provides the clearest demonstration to date of the impact of financing terms on sales price. The value of the prepayment lock-out is estimated, using a stochastic simulation, as a function of the level of interest rates, rate of volatility, and time remaining on the lock-out provision. Prices for co-op units are found to fluctuate with the value of the prepayment lock-out. The value of the lock-out is overcapitalized in the price of co-op units. Co-op status reduces the value of apartments by about 9%.
Volume (Year): 15 (1998)
Issue (Month): 2 ()
|Contact details of provider:|| Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323|
Web page: http://www.aresnet.org/
|Order Information:|| Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323|
Web: http://pages.jh.edu/jrer/about/get.htm Email:
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.:
- Wai K. Leung & C. F. Sirmans, 1990. "A Lattice Approach to Pricing Fixed-Rate Mortgages with Default and Prepayment Options," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 18(1), pages 91-104.
- Blomquist, Glenn & Worley, Lawrence, 1981. "Hedonic prices, demands for urban housing amenities, and benefit estimates," Journal of Urban Economics, Elsevier, vol. 9(2), pages 212-221, March.
- Coulson, N. Edward, 1989. "The empirical content of the linearity-as-repackaging hypothesis," Journal of Urban Economics, Elsevier, vol. 25(3), pages 295-309, May.
- White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
When requesting a correction, please mention this item's handle: RePEc:jre:issued:v:15:n:2:1998:p:163-176. 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: (JRER Graduate Assistant/Webmaster)
If references are entirely missing, you can add them using this form.