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33.

Real Estate Economics and Finance


Course code: FE - 322 Course title: Cr. Hour: 3 Prerequisite: Stat 251, ACCT 232 Objectives The main objective of this course is to introduce the student with the economics and finance of real state. A the end of the course the learner will

Understand the real estate market Examine Real Options Value Commercial Real Estate Properties Analyze Residential Mortgage Discuss The Economics of Mortgage Markets Scrutinize Secondary Markets
Explain Incremental Borrowing Costs and Mortgage Refinancing

Course description 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).

Unit 1:
Unit 3:

Real Estate Markets: Supply and Demand


Real Options: An Application to Real Estate Decisions

Unit 2: Valuing Commercial Real Estate Properties (Including Leasing)

Topic 4:

The Economics of Mortgage Markets: Understanding Mortgage Rates and Pricing Default Risk

Unit 5:
Unit 6: Unit 7:

Residential Mortgage Analysis: Mortgage Pricing, Underwriting, Default, Prepayments and Design
Incremental Borrowing Costs and Mortgage Refinancing Securitization and Secondary Markets

Unit 8: Decision.
Unit9:

Commercial Real Estate Examples: Optimal Leverage and the Lease vs. Buy
Real Estate Investment Trusts (REITS) (if time allows):

References
Brueggeman/Fisher ,Real Estate Finance and Investments, , Irwin Press, 12th Edition, 2005.

David Geltner and Norman Mil, Commercial Real Estate Analysis and Investments, by ler, 2001, Prentice Hall. Michael Buchanan, Commercial Real Estate Finance, by, 1994, American Bankers Association Press. William B. Brueggeman and Jeffrey D. Fischer Real Estate Finance and Investments, by, 12th ed., 2004, McGraw-Hill, Irwin Press