Joseph Gyourko

Education

PhD, University of Chicago, 1984; AB, Duke University, 1978

Recent Consulting

Commercial real estate market analysis; housing market analysis

Academic Positions Held

Wharton: 1984present; (Chairperson, Real Estate Department, 20072013; Chairperson, Real Estate Department, 19992003;

Nancy A. Nasher and David Haemisegger Director of the Zell/Lurie Real Estate Center at The Wharton School, 1998present;

Professional Leadership 20052009

Editorial Boards: Research Associate, National Bureau of Economic Research, Public Economics Program; CoDirector, NBER Project on Housing and Financial Crisis; various journal editorial boards; World Economic Forum Global Agenda Council on the Future of Real Estate

Corporate and Public Sector Leadership 20052009

Trustee, Urban Land Institute; Trustee, EII Realty Securities, Inc.; Executive Committee, Philadelphia District Council of the Urban Land Institute; Trustee, Max and Marian Farash Foundation

Joseph Gyourko (2017), Some Thoughts on a Trump Administration’s Possible Impacts on the Real Estate Sector , PREA Quarterly.

Fernando Ferreira, Anthony DeFusco, Joseph Gyourko, Wenjie Ding (Work In Progress), The Role of Contagion in the Last American Housing Cycle.

Joseph Gyourko, Jing Wu, Yongheng Deng (2016), Evaluating The Risk of Chinese Housing Markets: What We Know and What We Need to Know , China Economic Review, 39, pp. 91114.

Abstract: Real estate is an important driver of the Chinese economy, which itself is vital for global growth. However, data limitations make it challenging to evaluate competing claims about the state of Chinese housing markets. This paper brings new data and analysis to the study of supply and demand conditions in nearly three dozen major cities. We first document the most accurate measures of land values, construction costs, and overall house prices. We then create and investigate a number of supply and demand metrics to see if price growth reasonably can be interpreted as reflecting local market fundamentals. Key results include the following: (1) Real house price growth has been high, averaging 10% per annum since 2006. However, there is substantial heterogeneity across markets, ranging from 2.8% (Jinan) to 19.8% (Beijing). House price growth is driven by rising land values, not by construction costs. Real land values have risen by 14.4% per annum on average. In Beijing, the increase has been by a remarkable 27.5% per year (or by 1036%) since 2004. (2) There is variation about the strong positive trend in house price and land value growth. Land values fell by nearly onethird at the beginning of the global financial crisis, but more than fully recovered amidst the 2009–2010 Chinese stimulus. More recent growth has been much more modest, with some markets beginning to decline. Quantities of land sales by local governments to private residential developers have dropped sharply since 2013. The most recent data show transactions volumes down by half or more. This should lead to a reduced supply of new housing units in coming years. (3) Marketlevel analysis of short and longerrun changes in supply–demand balances finds important variation across markets. In the major East region markets of Beijing, Hangzhou, Shanghai and Shenzhen which have experienced very high rates of real price growth, we estimate that the growth in households demanding housing units has outpaced new construction since the turn of the century. However, there are thirteen large markets, primarily in the interior of the country, in which new housing production has outpaced household growth by at least 30% and another eleven in which it did so by at least 10%. Regression results show that a one standard deviation increase in local market housing inventory is associated with a 0.45 standard deviation lower rate of real house price growth the following year. (4) There are no official data on residential vacancy rates in China, but some researchers have reported very high figures (17%+). We develop a new series at the provincial level which yields a much lower vacancy rate on average, but it has been rising—from 5.2% in 2009 to 7.8% in 2014. (5) The risk of housing even in markets such as Beijing which show no evidence of oversupply, is best evidenced by pricetorent ratios. They are well above 50 in the capital city. Poterba's (1984) user cost model suggests these levels can be justified only if owners have sufficiently high expectations of future capital gains. Even a modest one percentage point drop in expected appreciation (or increase in interest rates) would result in a drop in prices of about onethird, absent an offsetting increase in rents.

Joseph Gyourko, Jing Wu, Yongheng Deng (2015), Real Estate Collateral Value and Investment: The Case of China , Journal of Urban Economics, 86 (1), pp. 4353.

Abstract: Previous research on the United States and Japan finds economically large impacts of changing real estate collateral value on firm investment that amplified the business cycles of those countries. Working with unique data on land values in 35 major Chinese markets and a panel of firms outside the real estate industry, we estimate investment equations that yield no evidence of a collateral channel effect. Further analysis indicates that China's debt is not characterized by the frictions that give rise to collateral channel effects elsewhere. Essentially, financially constrained borrowers appear able credibly to commit to repay debt in China. While there is no impact on investment via the collateral channel, our results should not be interpreted as implying there will be no negative fallout from a potential real estate bust on the Chinese economy. There likely would be, but through different channels.

Joseph Gyourko, “Regulation and Housing Supply”. In Handbook of Regional and Urban Economics, edited by (Gilles Duranton, J. Vernon Henderson and William Strange), Volume 5A, Elsevier, 2015, Amsterdam, The Netherlands: Chapter 19, (2015), pp. 12891338

Abstract: A wide array of local government regulations influences the amount, location, and shape of residential development. In this chapter, we review the literature on the causes and effects of this type of regulation. We begin with a discussion of how researchers measure regulation empirically, which highlights the variety of methods that are used to constrain development. Many theories have been developed to explain why regulation arises, including the role of homeowners in the local political process, the influence of historical density, and the fiscal and exclusionary motives for zoning. As for the effects of regulation, most studies have found substantial effects on the housing market. In particular, regulation appears to raise house prices, reduce construction, reduce the elasticity of housing supply, and alter urban form. Other research has found that regulation influences local labor markets and household sorting across communities. Finally, we discuss the welfare implications of regulation. Although some specific rules clearly mitigate negative externalities, the benefits of more general forms of regulation are very difficult to quantify. On balance, a few recent studies suggest that the overall efficiency losses from binding constraints on residential development could be quite large.

Fernando Ferreira and Joseph Gyourko (Working), A New Look at the U.S. Foreclosure Crisis: Panel Data Evidence of Prime and Subprime Borrowers from 1997 to 2012, (June 1, 2015).

Abstract: Utilizing new panel micro data on the ownership sequences of all types of borrowers from 19972012 leads to a reinterpretation of the U.S. foreclosure crisis as more of a prime, rather than subprime, borrower issue. Moreover, traditional mortgage default factors associated with the economic cycle, such as negative equity, completely account for the foreclosure propensity of prime borrowers relative to allcash owners, and for the threequarters of the analogous subprime gap. Housing traits, race, initial income, and speculators did not play a meaningful role, and initial leverage only accounts for a small variation in outcomes of prime and subprime borrowers.

Joseph Gyourko (2015), A New Direction for American Housing Policy , National Affairs.

Joseph Gyourko and Joseph Tracy (2014), Reconciling Theory and Empirics on the Role of Unemployment in Mortgage Default, Journal of Urban Economics, 80 (1), pp. 8796.

Abstract: Empirical models of mortgage default typically find that the influence of unemployment is negligible compared to other well known risk factors such as high borrower leverage or low borrower FICO scores. This is at odds with theory, which assigns a critical role to unemployment in the decision to stop payment on a mortgage. We help reconcile this divergence by employing a novel empirical strategy involving simulated unemployment histories to measure the severity of attenuation bias in loanlevel estimations of default risk due to a borrower becoming unemployed. Attenuation bias results because individual data on unemployment status is unobserved, requiring that a marketwide unemployment rate be used as a proxy. Attenuation is extreme, with our results suggesting that the use of an aggregate unemployment rate in lieu of actual borrower unemployment status results in default risk from a borrower becoming unemployed being underestimated by a factor more than 100. In addition, our analysis indicates that adding the unemployment rate as a proxy for the missing borrowerspecific unemployment indicator does not improve the accuracy of the estimated model over the specification without the proxy variable included. Hence, aggregate portfoliolevel risk estimates for mortgage guarantors such as FHA also are not improved. These views represent those of the authors and not necessarily those of the Federal Reserve Bank of New York or the Federal Reserve System. This is a revised version of a paper that previously circulated under the title “Unemployment and Unobserved Credit Risk in the FHA Single Family Mortgage Insurance Fund (NBER Working Paper No. 18880). John Grigsby provided excellent research assistance. We appreciate the helpful comments of Andrew Haughwout, Wilbert van der Klaauw, the editor (Stuart Rosenthal) and referees, but remain responsible for any errors.

Joseph Gyourko and Raven Molloy (Working), Regulation and Housing Supply.

Joseph Gyourko, Yongheng Deng, Jing Wu (Work In Progress), The Wharton/NUS/Tsinghua Chinese Resident ial Land Price Indexes (CRLPI) White Paper.

Abstract: The NUS/Wharton/Tsinghua Chinese Residential Land Price Indexes (CRLPI) are constantquality series that track changes in the real va lue of residential land parcels purchased via public bidding or auction from local governments in the 35 major cities across China . Data on the market share of these 35 markets in China’s aggregate land sales are not available. However, newlybuilt housing transactions in these cities as measured by floor area constitutes at least 30% of the national total for any year during 20042013, with the market share in value of these transactions being around 50% to 70%. Index values are reported at quarterly, semiannual, and annual levels for different levels of geographic aggregation (i.e., national, regional and city) depending upon data availability and quality. This white paper provides a technical description of the underlying land parcel data and the statistical methods used to estimate the reported indices.

Past Courses

BEPP208 HOUSING MARKETS

This course is designed for students interested in the economics and operations of housing markets. It is primarily a U.S. focused course, but does include a limited amount of international material for comparative purposes. The class is divided into four sections: (1) supply and demand for housing, including the operations of homebuilders and rental landlords; (2) house prices, including cycles and price dynamics; (3) international comparisons; and (4) public policy analysis applied to a current housing marketsrelated issue. This course presumes knowledge of intermediate economics, as we will apply that knowledge throughout the semester. For Wharton students, this means you must have passed BEPP 250 (undergrads) or MGEC 611 and MGEC 612 (MBAs). NonWharton students should have taken the equivalent course in the College.

BEPP708 HOUSING MARKETS

This course is designed for students interested in the economics and operations of housing markets. It is primarily a U.S. focused course, but does include a limited amount of international material for comparative purposes. The class is divided into four sections: (1) supply and demand for housing, including the operations of homebuilders and rental landlords; (2) house prices, including cycles and price dynamics; (3) international comparisons; and (4) public policy analysis applied to a current housing marketsrelated issue. This course presumes knowledge of intermediate economics, as we will apply that knowledge throughout the semester. For Wharton students, this means you must have passed BEPP 250 (undergrads) or MGEC 611/MGEC612 (MBAs). NonWharton students should have taken the equivalent course in the College.

FNCE209 REAL ESTATE INVESTMENTS

This course provides a broad introduction to real estate with a focus on investment and financing issues. Project evaluation, financing strategies, investment decision making and real estate capital markets are covered. No prior knowledge of the industry is required, but students are expected to rapidly acquire a working knowledge of real estate markets. Classes are conducted in a standard lecture format with discussion required. The course contains cases that help students evaluate the impact of more complex financing and capital market tools used in real estate. There are case studies and two midterms, depending on instructor.

FNCE399 INDEPENDENT STUDY

Integrates the work of the various courses and familiarizes the student with the tools and techniques of research.

FNCE899 INDEPENDENT STUDY

Independent Study Projects require extensive independent work and a considerable amount of writing. ISP in Finance are intended to give students the opportunity to study a particular topic in Finance in greater depth than is covered in the curriculum. The application for ISP's should outline a plan of study that requires at least as much work as a typical course in the Finance Department that meets twice a week. At a minimum, we need a description of the methodology you intend to employ, a bibliography and description of the data that you will use as well as a list of interim deliverables and dates to ensure that you complete the project within the semester. Applications for FNCE 899 ISP's will not be accepted after the THIRD WEEK OF THE SEMESTER. You must submit your Finance ISP request using the Finance Department's ISP form located at https://fnce.wharton.upenn.edu under the Course ISP section

REAL208 HOUSING MARKETS

This course is designed for students interested in the economics and operations of housing markets. It is primarily a U.S. focused course, but does include a limited amount of international material for comparative purposes. The class is divided into four sections: (1) supply and demand for housing, including the operations of homebuilders and rental landlords; (2) house prices, including cycles and price dynamics; (3) international comparisons; and (4) public policy analysis applied to a current housing marketsrelated issue. This course presumes knowledge of intermediate economics, as we will apply that knowledge throughout the semester. For Wharton students, this means you must have passed BEPP 250 (undergrads) or MGEC 611 and 612 for MBA's. NonWharton students should have taken the equivalent course in the College.

REAL209 REAL ESTATE INVESTMENTS

This course provides an introduction to real estate with a focus on investment and financing issues. Project evaluation, financing strategies, investment decision making and real estate capital markets are covered. No prior knowledge of the industry is required, but students are expected to rapidly acquire a working knowledge of real estate markets. Classes are conducted in a standard lecture format with discussion required. The course contains cases that help students evaluate the impact of more complex financing and capital markets tools used in real estate. There are case studies and two midterms, (depending on instructor).

REAL240 ADV REAL EST INV, ANALYS

This course is designed for majors in Real Estate, but is also open to financeoriented students who wish a deeper analysis of real estate investment and investment analysis issues than that offered in REAL 209. The class will contain a mixture of lectures, guest speakers and case discussions. Academic research is paired with recent industry analysis of key issues in order to marry sound theory and empirical results with current events and practices. Several classes will include lectures outlining what economics and finance tell us about a number of topics. Generally, these will be followed by guest lectures from industry professionals who will focus on a specific application of the principles introduced in the lectures.

REAL399 INDEPENDENT STUDY

All independent studies must be arranged and approved by a Real Estate department faculty member with the exception of the Annual Student Research Competition. ,Annual Student Research Seminar: This class meets in the Spring semester to analyze how to conduct research in the real estate market where to find data; how to critique research; how to frame research questions; how to write a business research report; how to present a business research report. Topics are provided each year. For more information regarding the Annual Student Research Competition see the Real Estate Department's website: http://realestate.wharton.upenn.edu/.

REAL708 HOUSING MARKETS

This course is designed for students interested in the economics and operations of housing markets. It is primarily a U.S. focused course, but does include a limited amount of international material for comparative purposes. The class is divided into four sections: (1) supply and demand for housing, including the operations of homebuilders and rental landlords; (2) house prices, including cycles and price dynamics; (3) international comparisons; and (4) public policy and analysis applied to a current housing marketsrelated issue. This course presumes knowledge of intermediate economics, as we will apply that knowledge throughout the semester. For Wharton students, this means you must have passed BEPP 250 (undergrads) or MGEC 611 and 612 for MBA's. NonWharton students should have taken the equivalent course in the College.

REAL721 REAL ESTATE INVESTMENTS

This course provides an introduction to real estate with a focus on investment and financing issues. Project evaluation, financing strategies, investment decision making and capital markets are covered. No prior knowledge of the industry is required, but students are expected to rapidly acquire a working knowledge of real estate markets. Classes are conducted in a standard lecture format with discussion required. The course contains cases that help students evaluate the impact of more complex financing and capital markets tools used in real estate. There are case studies and two midterms, (depending on instructor). Crosslisted with FNCE 721.

REAL840 ADV REAL EST INV, ANALYS

This course, is designed for majors in Real Estate, but is also open to financeoriented students who wish a deeper analysis of real estate investment and investment analysis issues than that offered in REAL/FNCE 721. The class will contain a mixture of lectures, guest speakers and case discussions. Academic research is paired with recent industry analysis of key issues in order to marry sound theory and empirical results with current events and practices. Several classes will include lectures outlining what economics and finance tell us about a number of topics. Generally, these will be followed by guest lectures from industry professionals who will focus on a specific application of the principles introduced in the lectures. Format: Lecture, industry speakers.

REAL899 INDEPENDENT STUDY

All independent studies must be arranged and approved by a Real Estate Department faculty member with the exception of the Annual Student Research Competition. Annual Student Research Seminar: This class meets in the Spring semester to analyze how to conduct research in the real estate market, where to find data; how to critique research; how to frame research questions; how to write a business research report; how to present a business research report. Topics are provided each year. For further information regarding the Annual Student Research Competition see the Real Estate department's website: http://realestate.wharton.upenn.edu/

REAL999 INDEPENDENT STUDY

Excellence in Teaching Awardee, 2010 Description

The Excellence in Teaching Awards are awarded annually to eight (8) MBA faculty members who receive the highest average instructor rating on their course evaluation forms over the three prior semesters. The course evaluation forms are filled out by the students at the conclusion of every course.

• US Job Relocation Activity Picks Up Sharply, The Financial Times 06/02/2011
• Revisiting the ‘Holy Grail’ of Home Ownership, WHYY.org 04/18/2011
• A Dream Endangered. (Yeah, So?), National Journal.com 03/17/2011
• When The Roof Fell In, The Economist 03/03/2011
• The Housing Bubble Trouble, National University of Singapore's Institute of Real Estate Studies. The Straits Times 09/29/2010
• Can Interest Rates Explain the U.S. Housing Boom and Bust?, VOXEU with Edward Glaeser, Joshua Gottlieb 08/28/2010
• Devalued Homes Anchor Prospective Job Seekers, NPR, "Morning Edition" 08/26/2010
• Did Low Interest Rates Cause the Great Housing Convulsion?, Economix, New York Times 08/03/2010
• Just How Risky Are China’s Housing Markets?, VOXEU, with Yongheng Deng, Jing Wu 07/28/2010
• Rethinking American Dream Of Home Ownership, NPR, “Talk of the Nation” 12/15/2009
• 5 myths about home sweet homeownership, Washington Post 11/15/2009

Knowledge @ Wharton

• Why Millennials Are Delaying Home Buying More Than Ever, Knowledge @ Wharton 11/18/2015
• Why Subprime Lenders Didn’t Cause the Housing Crash, Knowledge @ Wharton 09/17/2015
• Renewed Caution Takes the Air Out of China’s Land Price Market, Knowledge @ Wharton 11/21/2014
• The Role of Contagion in the Housing Boom (and Bust), Knowledge @ Wharton 08/26/2014
• Why High Land Prices in China Are Not a Bubble, Knowledge @ Wharton 11/05/2013
• Housing Has Bounced Back, but Capitol Hill Holds the Key to a Sustained Recovery, Knowledge @ Wharton 04/30/2013
• Locking Homeowners Out of Their Favorite Deduction: At What Price?, Knowledge @ Wharton 11/29/2012
• Optimism Is Up, but the U.S. Housing Market Faces a Painful Shift, Knowledge @ Wharton 04/25/2012
• Research Roundup: Homeowner Mobility, Divestitures and the Real Impact of FDI, Knowledge @ Wharton 12/07/2011
• The Walls Keep Tumbling Down: Foreclosure Flap and Other Housing Industry Woes, Knowledge @ Wharton 10/13/2010
• ABC’s IPO Underscores the ABCs of Banking in China, Knowledge @ Wharton 07/21/2010
• Tentatively and Sporadically, Real Estate Investing in the U.S. Makes a Comeback, Knowledge @ Wharton 01/06/2010
• Tentatively and Sporadically, Real Estate Investing Makes a Comeback, Knowledge @ Wharton 11/24/2009
• On Shaky Ground: Commercial Real Estate Faces Financial Tremors, Knowledge @ Wharton 07/22/2009
• Will the Levee Break? An Ocean of Bad Debt Rises despite Fed Rescues, Knowledge @ Wharton 09/17/2008
• After the Bailout: How Can the Fed Clean Up the Fannie and Freddie Mess?, Knowledge @ Wharton 09/17/2008
• Collateralized Damage: Commercial Mortgage Securities Are at a Standstill, Knowledge @ Wharton 07/23/2008
• Coming Soon … Securitization with a New, Improved (and Perhaps Safer) Face, Knowledge @ Wharton 04/02/2008
• Mortgage Crisis Bailout: Relief for Some, Risk for Others, Knowledge @ Wharton 03/05/2008
• Home Truths about the Housing Market, Knowledge @ Wharton 09/05/2007
• Subprime Meltdown: Who’s to Blame and How Should We Fix It?, Knowledge @ Wharton 03/21/2007
• The Millionaire down the Street Was Right, But Now What’s in Store for Real Estate?, Knowledge @ Wharton 06/14/2006
• Protecting the Value of Real EstateRich Portfolios, Knowledge @ Wharton 03/15/2006
• Is Commercial Property Still a Good Investment?, Knowledge @ Wharton 07/27/2005
• Are Easy Liquidity and RazorThin Returns Driving Real Estate to Dangerous Highs?, Knowledge @ Wharton 07/13/2005
• The MegaDeals Are Back in Commercial Real Estate, Knowledge @ Wharton 02/09/2005
• Why Real Estate Escaped the Recent Wave of Scandals, Knowledge @ Wharton 06/30/2004
• As Big Money Chases Real Estate, Markets Await Better Fundamentals, Knowledge @ Wharton 05/21/2003
• What Does the Future Hold For Real Estate?, Knowledge @ Wharton 11/20/2002
• It’s Boom Time in the Housing Market, But for How Long?, Knowledge @ Wharton 07/03/2002
• In an Uncertain Economy, Real Estate Holds its Ground, Knowledge @ Wharton 05/08/2002
• Real Estate Industry Poised for Recovery Despite Slowing Economy, Knowledge @ Wharton 11/21/2001
• Look for HighRises to be Shorter, More Secure and Still Anchored in Cities, Knowledge @ Wharton 09/26/2001
• Coming Soon: The Discount Broker for Commercial Space, Knowledge @ Wharton 07/18/2001
• America’s Big Cities: If They Get So Much Aid, Why Are They Always in Trouble?, Knowledge @ Wharton 06/06/2001
• Opportunities for B2B eBusiness in Real Estate, Knowledge @ Wharton 11/22/2000
• Vanguard’s Brennan on Stock Market: Resist Temptation; Emphasize Diversification; Stay Calm, Knowledge @ Wharton 05/24/2000
• Finding the REIT Value, Knowledge @ Wharton 05/24/1999