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Historically, research shows that out-of-town buyers of real estate are informationally disadvantaged and therefore pay higher prices compared to in-town buyers. However, with the recent advent of online housing platforms, a plethora of information about the housing market is provided for free. The purpose of this paper is to examine whether out-of-town buyers do in fact pay a premium and why, and whether this premium has decreased because of better information availability.

A hedonic regression model over a ten-year window (2005, 2015) is developed to analyze condominium transactions in Miami-Dade County. The results are validated by various robustness checks and the propensity score matching algorithm to identify a comparable control sample for 2015 in terms of relevant housing characteristics.

The results support the hypothesis that out-of-town buyers pay higher prices for real estate, compared to their local counterparts, and that both search costs and anchoring cause a premium in both years, whereas wealth only plays a significant role in 2005. The premium because of search costs, and therefore, information availability has decreased slightly over time.

This is the first out-of-town paper that compares two points in time versus a single cross-section analysis. Besides the premium caused by information asymmetry/search costs measured by distance and the anchoring effect, the regression model is extended by the wealth effect.

This paper aims to investigate the foreclosure discount for the German residential market in the years from 2008 to 2011.

The determinants of the foreclosure discount are estimated in a hedonic price model. The analysis is based on a unique data set compiled from three different data sources with 135,000 foreclosed properties.

The findings reveal that residential units in foreclosures are sold at a discount of 19 per cent compared to residential units with similar characteristics that are not in foreclosure. Second, a regional pattern can be observed, with discounts being negatively correlated to unemployment risk and liquidity. Third, the model with interaction terms shows that foreclosure discounts are linked to specific property characteristics. Fourth, these object-related risks are typically smaller than regional risks or locational risks.

Given the highly fragmented system of Gutachterausschüsse in Germany, who are responsible for collecting transaction data, we were not able to directly analyze transaction data, but only a proxy for this price information.

The results can be important for financial institutions that are trying to assess the risk of lending for a specific object in a specific location. So far, banks primarily try to assess the default risk of private lenders by analyzing the debtor’s financial position and the quality of the property. The analysis provides insights into which characteristics of a property might imply additional risk, and in which region these risks are biggest.

To the best of the authors’ knowledge, this is the first attempt to analyze the foreclosure discount for the German housing market.

The primary purpose of this paper is to review and critique Taleb's notion of black swan blindness for a subset of the broader field of financial economics – the search for capital adequacy rules for financial institutions who invest in residential mortgages. This search entails the analysis and prediction of extreme events in housing and mortgage markets.

The focus of this paper concerns efforts to assess the likelihood and consequences of extreme and consequential economic events prior to their occurrence. The goal is to assess the criticism offered by Taleb that economists overstate the understanding of extreme events. One piece of evidence consists of a case study of the literature and policies regarding capital adequacy for financial institutions who invest in residential mortgages. The other is a review of recent literature about the crisis that offers similar conclusions.

The evidence suggests that the criticism is valid. The case study reviews a number of areas in which the search for capital adequacy reflected the traits of black swan blindness as described by Taleb. The review of the recent literature about the crisis highlights a number of papers that reach similar conclusions. These include high level overviews of the literature on the crisis, e.g. Lo, a number of papers that specifically focus on housing and mortgage markets, and some very recent work about agent based modeling and complexity theory presented at the 2012 ARES meetings.

The conclusion suggests a number of ways in which economists can combat the potential of black swan blindness is our search for extreme events. One suggestion is to combat the error of confirmation with ongoing testing. Combating overly simplistic narratives can also be addressed by listening more carefully to the criticisms by people outside the field. Pay more attention to silent evidence by having more substantial and ongoing consumer testing of new products, more work to identify best practices, and more resources to enforce lending laws. Finally, more attention needs to be focused upon assumptions in the models that are based upon limited empirical evidence and, if found later to be false, may lead to dire outcomes.

These include more and ongoing evaluation of stress tests. New rules to adjust capital requirements over the business cycle are consistent with the suggestions of the paper. Economists need to spend more time exploring and learning from outliers in the models.

The recent crisis has been driven by a wide variety of factors from within many sectors and agents. The outcome has been a major problem for people in many sectors and regions of the economy. The hope is that economists can do a better job in the future to help policymakers and others be more prepared for the potential of extreme events in the hopes of avoiding them in the future or at least reducing their likelihood and damage caused by them.

The paper draws upon a wide variety of literature to establish its main points. Central to it is a review of an issue on which the author had substantial experience – academic and professional – and that also played a major role in the crisis – inadequate capital for an extreme downturn in house prices.