REAL ESTATE FINANCE FIN 3334/5334

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REAL ESTATE FINANCE FIN 3334/5334 Professor David M. Harrison Fall 2009

What is Real Estate Finance? Finance Defined – Real Estate Defined – Note: Real Property = Real Estate Finance is… David M. Harrison, Ph.D. Real Estate Finance Texas Tech University

Why is Real Estate Important? Assets of “Developed Economies” – Year End 2002 Residential Property: $48 trillion Commercial Property: $14 trillion Equities: $20 trillion Government Bonds: $20 trillion Corporate Bonds: $13 trillion Total: $115 trillion REAL ESTATE ACCOUNTS FOR OVER HALF OF ALL ASSET VALUE IN THE DEVELOPED WORLD!!! Source: The Economist David M. Harrison, Ph.D. Real Estate Finance Texas Tech University

U.S. Security Market Size by Sector Debt: Commercial Paper: $2.2 trillion Treasuries: $5.0 trillion Agency/GSE: $6.7 trillion Municipals: $2.5 trillion Corporate/Foreign: $10.1 trillion Bank Loans: $1.7 trillion Other: $1.7 trillion Mortgages: $13.5 trillion Consumer Credit: $2.4 trillion Total: $45.9 trillion Equity: Corporate Equities: $20.8 trillion Source: FRB Pub. Z1, Table L.4, 6/7/2007 David M. Harrison, Ph.D. Real Estate Finance Texas Tech University

U.S. Credit Market Debt by Sector Source: FRB Pub. Z1, Table L.4, 6/7/2007 David M. Harrison, Ph.D. Real Estate Finance Texas Tech University

The Environment of Real Estate Finance Institutions: Markets: David M. Harrison, Ph.D. Real Estate Finance Texas Tech University

The Process of Financial Intermediation David M. Harrison, Ph.D. Real Estate Finance Texas Tech University

Warm-up Exercise 4 9 2 7 8 6 5 3 1 David M. Harrison, Ph.D. Real Estate Finance Texas Tech University

Warm-up Exercise: Solution 8 4 5 6 3 9 2 7 1 David M. Harrison, Ph.D. Real Estate Finance Texas Tech University

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