New Syllabus
Real Estate Economics and Finance
Spring 2005
Instructor:
Office:
Erik Hurst
HPC 378
Phone:
email:
(773) 834 4073
erik.hurst@gsbfac.uchicago.edu
webpage:
office hours:
http://gsbwww.uchicago.edu/fac/erik.hurst/index.html
Made by appointment.
Course Text:
1)
Real Estate Finance and Investments, Brueggeman/Fisher, Irwin Press,
12th Edition, 2005 (mandatory).
Purpose:
The course is designed to provide students with an introductory analysis into real estate markets.
This class will provide an overview of real estate markets, real estate liabilities, real estate
investments and the public policy associated with real estate issues. The class starts with an
analysis of real estate markets with emphasis placed on what determines house price movements
(including bubbles). This analysis will form the foundation of the rest of the course. We
separately analyze residential and commercial properties. In doing so, we focus on real estate
property development. The next chunk of the class is spent discussing the pricing of mortgage
liabilities. We ask how firms manage interest rate and default risk. We then turn to the role that
the government plays in securitizing mortgages. We spend a good fraction of time understanding
the secondary mortgage market. We then end the course with an advanced commercial real estate
issues. If time allows, we will start discussing Real Estate Investment Trusts (REITS).
Course Plan:

Course grading will be comprised of the following:
Weekly quizzes (30% of the grade)
Homework/Cases (10% of the grade)
Final Exam (60% of the grade)

In weeks 2-9, there will be a 10-15 minute quiz at the beginning of the class. In total,
there will be 8 quizzes throughout the course. If you cannot make class, you will receive
a zero for that week's quiz. However, I will drop the lowest two quiz grades. That
ensures that individuals can miss up to two quizzes without being penalized. As a result,
no quizzes can be made up (regardless of situation!). This is a strict rule. No exceptions
will be made for any reason. If you skip or do poorly on early quizzes and have to miss
quizzes later in the class for some unexpected reason, you will receive a zero for that
quiz. Many of you have unexpected business travel throughout the term. If you are one
of those people, I would plan on taking and preparing for all quizzes early in the term.

Homework are due at the beginning of class. For homework, there will be one problem
set due in week 9. The problem set is to be handed in individually. Individuals must
write up their own answers. You can consult with other students on the project.
However, each individual must hand in their own unique set of results. If there is any
evidence that the results were simply copied from another, neither party will receive any
credit for their homework.

The final is mandatory! There will be no make-up. If you miss the final, the only other
option is to retake the final the next time I teach this course (which may be Spring 2007
or Spring 2008). I will not be teaching this course during the 2005-2006 academic year.

The final will take place during week 10 (not during finals week). The reason is that
many of your internships will take place during exam week as well as the fact that
graduation will take place during the weekend which are final is scheduled.
Grading:
The target GPA for my course is 3.2 (the mandatory maximum is 3.25). But, as always, I reserve
the right to go below the threshold (an unlikely, but possible, situation – I like to leave the option
open if necessary). All re-grade requests must be submitted in writing by one week after the tests
are handed back. I will re-grade the whole exam with a re-grade.
Honor Code:
All honor code rules are in effect – even if not explicitly mentioned on each Test/Assignment.
When handing in an assignment you automatically pledge your honor that you did not give or
receive help beyond the parameters of the assignment. As discussed above, homework can be
done in a group – as long as it is noted on the homework.
Reading List and Course Outline
Pre Course Readings (Setting the tone for the course)
Text:
Chapters 1, 2, 3 (a lot of background, a must read for all of us).
Topic 1:
Real Estate Markets: Supply and Demand
Timing:
Week 1 and Week 2 (first ½)
Text:
None: Just my lectures
Topic 2:
Valuing Commercial Real Estate Properties (Including Leasing)
Timing:
Week 2 (second ½) and Week 3 (first ½)
Text:
Chapters 9 and 10
Topic 3:
Real Options: An Application to Real Estate Decisions
Timing:
Week 3 (second ½) and Week 4 (first ½)
Text:
None
Topic 4:
The Economics of Mortgage Markets: Understanding Mortgage Rates and
Pricing Default Risk
Timing:
Week 4 (second ½) and Week 5 (first ½)
Text:
None
Topic 5:
Residential Mortgage Analysis: Mortgage Pricing, Underwriting, Default,
Prepayments and Design
Timing:
Week 5 (second ½) and Week 6 (first ½)
Text:
Chapters 4 and 5
Topic 6:
Incremental Borrowing Costs and Mortgage Refinancing
Timing:
Week 6 (second ½) and Week 7 (first ½)
Text:
Chapters 6, 7 and 8
Topic 7:
Securitization and Secondary Markets
Timing:
Week 7 (second ½) and Week 8 (first ½)
Text:
Chapters 19 and 20
Topic 8:
Commercial Real Estate Examples: Optimal Leverage and the Lease vs.
Buy Decision.
Timing:
Week 8 (last ½)
Text:
Chapters 11, 12, 13, and 15 (14 if interested)
Topic 9:
Real Estate Investment Trusts (REITS) (if time allows):
Timing:
Week 9
Text:
Chapter 21 and 22