Market Efficiency,
Housing Affordability and
the Real Estate “Bubble”
Samuel Alfred Leger
Basic Idea


To develop a better understanding of
the current real estate and housing
markets
Develop a new measure of housing
affordability
Research Questions




What is driving housing appreciation?
Is the real estate market staying
efficient?
Is there actually a real estate
“bubble”?
What can recent homebuyers do to
stay afloat in an inflated real estate
market?
Research


Develop a measure of housing
market efficiency and use this
measure also to consider housing
affordability
Examine housing market conditions
within the Cape Fear region
Information Table
Home
Housing
Mortgage
Housing
Ownership
Stock
Interest Affordability
Rates
Rates
Median
(thousands)
Price
1975
N/A
79,087
14.72%
$35,300
1985
63.9%
99,931
11.93%
$75,500
1995
64.7%
109,457
8.01%
$113,100
2004
69.2%
122,470
5.88%
$188,900
Research




Examine home prices, interest rates
and household income to see how
those variables have swayed.
Interest rates adjust to record lows
Household income and inflation were
modest
Possible drivers for housing
affordability
Research and Process


Developing a measure of housing
affordability and tracking it over a
period of time
To discover any extremes in the
market, either today or in the recent
past.
Research and Process


Considering median house prices
along with the median household
income; a ratio of these is developed
for North Carolina with regional data
reach conclusions about the local
market.
Purpose

Give insight about market conditions,
housing affordability and the much
discussed real estate “bubble”
Bibliography
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Anderson, Randy and Youguo Liang., 2001, Mature and Yet
Imperfect: Real Estate Capital Market Arbitrage, Journal of real
Estate Portfolio Management, 7: 3, pg. 281.
Fickes, Mike., 2001, Feasting on Market Inefficiency Worldwide,
National Real Estate Investor, 43: 11, pg. 26.
Geddes, Ryan., 2004, Housing Bubble Building?, Business Journal,
19: 49, pg. 1.
Guran, Lleana., 2000, Housing Opportunity Index, Housing
Economics, 48: 6, pg. 3.
Liang, Youguo and Richard A. McLemore., 2004, Housing
Appreciation- The Three Fundamental Drivers, Real Estate
Finance, 21: 1, pg. 3.
Rex, Tom R., 2000, Housing Affordability Worsens For Low-Income
Households, Arizona Business, 47:11, pg. 5.
Rex, Tom R., 2001, Housing Appreciation Varies Widely Across
Nation, Arizona Business, 48: 3, pg. 1.
Wang, Peijie., 2000, Market Efficiency and Rationality in Property
Investment, Journal of Real Estate Finance and Economics, 21: 2,
pg 185.
Zietz, Emily N., 2003, Multifamily Housing: A review of Theory
and Evidence, The Journal of Real Estate Research, 25: 2, pg 185.