Real Estate

This paper analyzes the AI infrastructure boom as a physical capital buildout centered on data centers, power infrastructure, cooling systems, and specialized chips. It studies how this buildout is financed through hyperscalers, third-party developers, REITs, private credit, and structured finance, and discusses the implications for leverage, risk allocation, and financial stability.

This chapter summarizes the tectonic shifts that took place in the U.S. housing market between 2019 and 2025. I explore the roles of remote work and lower interest rates in the dramatic rise of aggregate house prices, the"flattening" of the urban bidrent curve in the cross-section of locations, and the fiscal implications of the "Urban Doom Loop." I discuss how mortgage lock-in effects may have stabilized house prices in the wake of more recent increases in interest rates, at the expense of residential mobility.

Working from home resulted in a sharp contraction in office demand. We built a valuation model to find that the office stock lost about 45% in value. More for low-quality buildings and in cities with a larger IT sector and less for trophy buildings. We discuss the implications for mortgage lenders and the vitality of cities.

Almost one-third of U.S. commercial mortgage dollars sits on regional bank balance sheets. Recent commercial property revaluations have sparked concerns that this substantial exposure may create fractures in the banking system and spill over to the wider economy. To assess commercial real estate (CRE) risks in regional banks, we construct a novel loan-level dataset from county records. While many regional banks have benefited from exposure to better-performing markets thus far, reported delinquencies understate risks from undercollateralized loans by a factor of four.

We construct a new quality-adjusted commercial real estate rent index for U.S. office, retail, and industrial markets using more than one million CompStak lease transactions from 2010-2025. A hierarchical hedonic framework with building-, block-, and ZIP-level fixed effects allows us to control for both observable and unobserved quality, producing quality-adjusted rent indices.

We examine frictions in dealer intermediation in durable consumer goods markets through the lens of “iBuyers,” technology-driven entrants that facilitate transactions via online platforms and algorithmic pricing. iBuyers provide liquidity to households by bypassing the lengthy household-to-household sale process and earn a positive gross spread. However, their intermediation is limited to relatively liquid and easier-to-value homes. We build and calibrate a dynamic search model with intermediaries facing adverse selection to quantify the economic frictions in this market.

We develop a conceptual framework and an empirical methodology to analyze the effect of rising interest rates on the value of U.S. bank assets and bank stability. We mark-to-market the value of banks' assets due to interest rate increases from Q1 2022 to Q1 2023, revealing an average decline of 10%, totaling about $2 trillion in aggregate. We present a model illustrating how asset value declines due to higher rates can lead to self-fulfilling solvency runs even when banks' assets are fully liquid.

Professional house price forecast data are consistent with a rational model where agents must learn about the parameters of the house price growth process and the underlying state of the housing market. Slow learning about the long-run mean generates overreaction to forecast revisions and a modest response of forecasts to lagged realizations. Heterogeneity in signals and priors about the long-run mean helps the model account for cross-sectional dispersion in forecasts. Introducing behavioral biases helps improve the model's predictions for short-horizon overreaction and dispersion.

Following the Great Financial Crisis (GFC), the Credit Risk Transfer (CRT) bond market emerged as a new asset class in U.S.  mortgage market. We develop an asset pricing framework for CRTs consistent with Treasury, corporate, and housing markets. Our analysis reveals that the Government-Sponsored Enterprises compensate investors approximately fairly on average, though they overpay for low-risk tranches and underpay for high-risk ones. Additionally, the post-GFC guarantee fee increases broadly align with underlying credit risk.