This dissertation consists of essays relating to the three important real estate research topics: spatial statistics, mortgages, and real estate investment trusts (REITs). In the first essay, “Spatial Distribution of Retail Sales,” we apply retail gravity models to examine the spatial distribution of retail sales for a retail chain in the Houston market. Unlike previous empirical studies, our study models both the spatial dependencies among both consumers and retailers. Our results show both the spatial dependencies have significant impacts on the estimates of parameters in retail gravity models. Contrary to the suggestions of Guitschi (1981) as well as Eppli and Shilling (1996), our results show the importance of the distance parameter in retail gravity models may be understated about 68%. Thus, previous studies may overestimate the deterministic extent of trade areas and, thus understate the importance of good locations.
The second essay, “Local Housing Prices and Mortgage Refinancing in US Cities,” has implications the valuation of mortgages, in particular mortgage-backed securities (MBS). This essay provides additional evidence that house prices significantly impact aggregate refinancing and thus directly impact mortgage termination. Previous studies typically focus on the effect of negative appreciation on refinancing. In contrast to previous studies, this essay provides empirical evidence that a positive house price appreciation may motivate borrowers to refinance for capital structure-based or consumption reasons.
The third essay, “Monitoring and Dividend Policy for REITs under Asymmetric Information,” examines the interaction between monitoring and two competing explanations for REIT dividend policy under asymmetric information. Specifically, the REIT empirical literature offers two competing theories for the level of dividend payouts under asymmetric information. Wang, Erickson, and Gau (1993) confirm the agency-cost theories. Bradley, Capozza, and Seguin (1998) support the signaling explanations dominating agency cost explanations. In this essay, we demonstrate that by introducing proxies for taxable income and monitoring, we provide evidence that supports agency cost explanations for ineffectively monitored REITs. Furthermore, in contrast to Bradley, Capozza, and Seguin (1998), we show agency cost explanations dominate signaling explanations for these REITs.