Despite a slow housing market and problems with the real estate industry, students are still signing up for real estate classes at the state’s three largest public universities. Although real estate professors at the University of Mississippi, Mississippi State University (MSU) and the University of Southern Mississippi don’t have official enrollment figures for the fall semester, they are confident their programs continue to attract students.
MSU’s interim Robert W. Warren Chair of Real Estate, Michael Highfield, Ph.D., believes the media publicity about real estate causes students to have more questions. Perhaps these questions, fed by students’ inquisitive nature, leads to more real estate courses and real estate majors as a result. The Starkville school has seen a steady increase in the number of students taking principles of real estate.
“Actually, I generally find that the discussion of a particular topic (good or bad) generates interest in a specific major,” he said. “For instance, even after the Arthur Andersen debacle, accounting saw a slight increase in net majors nationwide. I think the same is true for real estate now. Parents often seem more concerned than the students themselves.”
Kimberly R. Goodwin, Ph.D., an assistant professor of finance at Southern Miss, says enrollment at the Hattiesburg school appears to be close to the average of the past four years.
Short and long term
“Students are a little apprehensive about the short-term outlook for the real estate industry, but that does not seem to significantly alter their desire to have a career in real estate,” she said. “Real estate is the single largest asset class in the United States with a market value of over $20 trillion, and it accounts for over half of the world’s wealth. The long-term outlook for the industry is strong.”
Assistant professor of finance/real estate at the University of Mississippi Matthew D. Hill, Ph.D., says it’s hard to say at this point how enrollment in the program is holding up at his school.
“Our enrollment is up, but I suspect if the housing crisis affects enrollment, the effect would be lagged,” he said. “We should have a better feel of this next year. Having taught ‘Principles of Real Estate’ this summer, I should add that students are very curious about real estate, given what they pick up from the popular press.”
There are no new real estate courses this fall at Ole Miss, but Hill plans to emphasize the secondary mortgage market to a much greater degree than was previously taught at the Oxford school.
At Southern Miss, Goodwin says the usual courses in real estate principles, real estate finance and real estate law are offered in the fall semester.
Different sides of business
The real estate and mortgage financing degree at Mississippi State heavily emphasizes the finance side of real estate as opposed to only the brokerage side.
“That is, while many of our students enter the real estate brokerage area (sales), approximately the same number enter the real estate investment area (mortgage lending, underwriting, real estate investment),” Highfield said.
“It is this latter area, real estate investment, particularly mortgage financing, which has garnered the most interest in recent years. Students seem to be searching to better understand the role real estate investment has played in the economy.”
Highfield, assistant professor of finance, says almost all of the courses have been modified to reflect the recent changes in the economic environment, particularly with respect to real estate.
“We are actively considering the addition of a new course in the spring or fall 2009 semesters,” he said. “Currently, the MSU curriculum consists of five core real estate courses: ‘Real Estate Principles,’ ‘Real Estate Law,’ ‘Real Property Evaluation,’ ‘Real Estate Investments’ and ‘Mortgage Financing.’”
Goodwin sees green development as one of the biggest trends in real estate today. “As the cost of energy continues to rise, energy-efficient buildings and utilizing alternative energy sources are becoming increasingly important,” she said. “The demand for energy star-certified and LEED-certified real estate far exceeds the current supply.”
Hill says banks will more fully vet borrowers and employ tighter lending standards. “Specifically, lenders will require larger down payments, and it’s doubtful banks will offer exotic mortgages such as interest-only loans and loans with maturities longer than 30 years any time soon,” he said.
More regulation of the real estate industry, particularly in the mortgage brokerage area, is a trend Highfield sees on the horizon.
“This idea has already been floated on Capitol Hill, and I expect to see more regulation in this area after the November elections,” he said. “Regulations, along with market forces, will reduce the number of mortgage products available. Also, while the Appraisal Institute has recently made substantial changes to their requirements, I think we will see a more watchful eye on the appraisal area from both corporate and government stakeholders.”
This professor expects the housing market to continue to be soft for the next six to 12 months with this winter as the bottom of the cycle and things starting to improve next spring.
“With that said, I should note that some areas of Mississippi have seen little-to-no slow down at all,” he said. “For instance, the Starkville and Oxford markets have been relatively robust to the current housing market crisis.”
Hill points out that Standard and Poor’s/Case-Shiller residential research bulletin shows 11 months of existing home sales supply and 10 months supply of new home sales.
“Clearly, this is a large number of homes for our market to absorb,” he said. “I expect reduced housing demand in the near term, mainly due to increased mortgage rates. Certainly, increased fuel prices will not help. Reduced demand without a change in supply will continue to decrease house prices.”
However, Hill believes that at some point, prices will drop to the point that speculators awash in cash will begin to purchase real estate.
“As we emphasize to the students, a market correction is not the time to ignore a particular asset as it creates buying opportunities,” he added. “Mississippi is fortunate to have mainly avoided this market correction.”
Contact MBJ contributing writer Lynn Lofton at email@example.com.