Z. R. HUSZÁR
REAL ESTATE RESEARCH
All research papers are available for download at SSRN and ResearchGate
My academic research is policy focused. I examine the economic consequences of capital market regulatory changes and regulatory differences across countries or states in the context of residential mortgage market and the stock market. Specifically my two main research areas are: (1) capital markets and asset pricing in conjunction with regulatory changes or role of regulators and (2) financial liberalization, regulations, and corruption in the area of real estate finance and investment.
Mortgage lending regulatory arbitrage: A note on nontraditional lenders and mortgage licensing, 2019, JOURNAL OF REAL ESTATE RESEARCH
In the study, with Wei Yu, we examine the role of weak licensing regulations in relation with lending practices by nonbank lenders.We find that weak industry barriers created by lose state regulations have negative economic consequences at the state level due to active lending by “opportunistic” lenders who could or would not have entered the industry if the barriers were higher. Research on nonbank lenders is likely to remain relevant and increasingly important because with the full implementation of Basel III and IV as banks are becoming “overregulated”, the less-regulated financing institutions and FinTech services continue to gain market presence and become the primary choice for home loans and potentially for business borrowing.
Regulations effect on Lending practices: Traditional Banks versus Nonbanks (new Fintech firms emergence)
In two related studies, I examine the nontraditional lenders lending practices in relation with minority borrowers. While numerous studies examine loan performance and credit allocation at the loan levels, there is limited research on the institutional level. In our paper, the “Disclosure and Lending practices: A comparison between depository and nondepository subprime lenders” (revise and resubmit at the Journal of Real Estate Research), we focus on the institutional differences in relation to lending practices before the housing bubble. We show that while banks were affected by regulatory changes because of the active state and/or federal level supervision the non-banks were not affected by the regulatory changes because there was no enforcement mechanism in place for nonbank lenders. In a study titled “Does Mandatory disclosure affect subprime lending in minority neighbourhoods” we show that, nontraditional nonbank lenders actively targeted minorities even after the increased disclosure requirement (published in 2012 the Journal of Economics and Finance).
Real Estate in the context of a diversified portfolio, 2013, JOURNAL OF REAL ESTATE FINANCE AND ECONOMICS
Real Estate as a major asset is important in all portfolio investment. In this study, with Weina Zhang and Gang-Zhi Fan, we examine the pricing implication of market co-movements for real estate and financial assets. We show that real estate price generally decline with expected financial asset risk, in contrast to what is suggested in the real option literature. More importantly our model explains the unexpected market crashes of recent years― real estate prices initially increase with increasing financial asset risk but reverse (and may even crash) when markets strongly co-move.We explore the complex portfolio investment decisions and the role of real estate in a diversified portfolio. With realistic market parameters, it can be shown that there is a nonlinear relationship between real estate price and financial risk. When the market comovement is strong, real estate prices initially increase with financial asset risk but eventually prices decline as financial risk becomes too high, and overspill to other markets. Overall, real estate decisions require careful evaluation and preparation. However, investors often enticed prematurely into real estate investment with hybrid ARMs that have attractive low initial interest rates, seemingly making real estate low cost – low risk investment.
The helping hand of the state in Chinese Real Estate firms: Anti-corruption and Liberalization, 2016, INTERNATIONAL REAL ESTATE REVIEW
More recently, I am interested in corporate governance issues in the context of Asia. Corruption is internationally a major concern in the real estate sector where successful corruption with large public projects can generate millions in profits (OECD Report 2014). In this paper, with Gang-Zhi Fan and Weina Zhang, we show that state level corruption clean-up work as a corporate governance mechanism in Chinese Real Estate firms. We show that traditional western governance tools, such as board independence, CEO compensation, are ineffective in aligning managerial interest and facilitating performance improvement. However, we find that in provinces with increased prosecuted corruption cases, the non-state firms benefit from the leveled playing field. Currently, we extending our research on the economic impact of this corruption clean-up issue in China and examine firm performance in all industries. Specifically, we test which industries are the most sensitive to corruption clean-up and financial liberalization.
A note on hybrid mortgages , 2005, JOURNAL OF REAL ESTATE ECONOMICS
In the area of real estate, my research focuses on examining mortgage lending regulations and mortgage products to better understand optimal financing and investment decisions for borrowers. In my first research paper, with my advisor Brent W. Ambrose and mortgage expert Michael LaCour-Little, we are the first to examine hybrid-adjustable rate mortgages (ARM). We show that borrowers actively react to changing market conditions and the well informed educated borrowers strategically refinance hybrid adjustable rate mortgages (hybrid-ARMs) as interest rate rises. These results are also the first to highlight the importance of prepayment link in conjunction with default risk, which is previously generally overlooked. With the development of the subprime mortgage market in the new millennium, these new mortgage types become commonplace but there was little information available on the risks associated with these assets. We provide the first empirical analysis on prepayment decisions in relation to changes in macroeconomic conditions.