In the academic world, applied research is — to put it mildly — frowned upon. To get ahead (i.e., tenure) "real" professors must write a number of think-pieces for scholarly journals refereed by their peers. That’s why the researchers at the Real Estate Center at Texas A&M University are so popular with everyday Texans, but have rarely gotten the respect they deserve from academia.

Researchers at the Center investigate and write about issues of concern to Texans today. They write about what is happening in real estate, why it is happening, what people can do about it, and what they can expect in the future.

That’s called “applied” research. It’s research designed specifically to help Texans make better real estate decisions. A specific article or speech may not have a lengthy bibliography, but that doesn’t mean the homework hasn’t been done.

Still, you have to give the wooly-headed set their due. They do come up with some interesting academic research, and once a year they put the best on show at the American Real Estate Society (ARES) meeting. We coax Jack C. Harris, Ph.D., a retired Center research economist, out of retirement a few days each year. He attends the ARES gathering, listens to the papers presented, and reports to us anything worth passing along to the outside world. Here are some highlights from the 2009 meeting.

Professors from around the world reported their findings on questions as diverse as what spawned the housing bubble to whether emotion influences sales price to how real estate owned (REO) sales affect housing markets.

Yes, there was a bubble
A pair of researchers at CERGE-EI, a Czech university, examined evidence about the origins of the housing bubble and whether it ever existed at all.
 “Home prices rose beyond a level that could be explained by corresponding improvements in economic fundamentals,” report Vyacheslav Mikhed and Petr Zemcik. “Bubbles are born in this type of environment, when buyers overbid in the belief that prices will continue to rise.”

Not only was there a recent bubble, but there was one in the late 1980s, they say. Remember the big Texas construction boom prior to the collapse of oil prices? The latest bubble began in 2000 and ended in 2006.

Get emotional, pay more
Michael Rehm of the University of Auckland took advantage of a uniquely rich database maintained by the City of Milwaukee to examine the influence of emotion on sales prices. He analyzed 33,000 home sales to determine if sales price is dependent on whether a property is purchased for investment or consumption.

Some believe investors take advantage of owner-occupants when buying or selling houses. Investors probably have more market experience and are better informed on current prices. Presumably, investors are more objective and, therefore, the decision is purely a financial one.

Buyers may fear they will be shut out if prices rise further. Sellers may fear they will not be able to sell in time. While some buyers simply “fall in love” with a particular house, others just tire of looking. Either way, negotiating the sales price might be handicapped.

In the final analysis, Rehm’s research reveals that homebuyers pay a premium (more than the expected price) while investors get a discount. And if the housing supply is more limited, such as in the inner city, the advantage swings even more toward the investor.

“During the recent housing boom, some market observers felt investor-speculators were driving up home prices,” says Harris. “This study offers evidence that investors actually paid lower prices.”

Don’t sell short sales short
 A short sale occurs when a lender agrees to accept less than the outstanding balance to retire a mortgage debt. The National Association of REALTORS® reports that 40% of its members were involved in at least one short sale in 2007.

To measure how REO sales affect housing markets, Thomas Jackson of the Mays Business School at Texas A&M University looked at home sales in a selected set of Indianapolis neighborhoods from 2000 to 2008. In that time, REO sales went from less than 1% to more than 50%.

Jackson found that as REO sales increased, the prices of both REOs and other sales declined – an indication that foreclosures depress the market price. Or, it could be that all home sales are being affected by external factors, such as rising unemployment and contraction of credit markets.

In the end, Jackson could not support one possibility over the other. But that’s the nature of research. You never know where the research will lead.

More than likely, Jackson determined, a complex feedback process occurs in which market conditions lead to more foreclosures, which eventually bring more REO sales into the market, increasing supply at a time when demand is falling, thereby depressing prices.

The study did document that marketing time for REO sales is half that for other sales. So having this inventory on the market does help clear the market and stabilize supply and demand.

If you are looking for answers to some down-to-earth questions not covered here, you might want to check out the Texas Real Estate Center’s Web site. We don’t have much data from Milwaukee or Indianapolis, but we can tell you a lot about Texas cities and towns. Our site has some 30,000 pages of data, information available in all manner of formats – downloadable articles, market reports, daily news updates, podcasts, videos, RSS feeds, and even Twitter posts.