The Unassuming Economist

On cross-country:

• European Mortgage Markets Quarterly Review – European Covered Bond Council
• Singapore’s private-public housing mix could offer solutions for Toronto and Vancouver – The Globe and Mail
• Financial cycles in euro area economies: a cross-country perspective – Deutsche Bundesbank

On the US:

• Quantities and Prices during the Housing Bust – Federal Reserve Bank of New York
• Characteristics of Domestic Cross-Metropolitan Migrants – BuildZoom
• San Diego’s Mexican property market at risk from Trump tariffs – Financial Times
• House Price Markups and Mortgage Defaults – Federal Housing Finance Agency
• Case-Shiller – A surprise in the bottom 3 cities – Real Estate Decoded
• The Unfulfilled Promise of Fair Housing – The Atlantic
• Housing Wealth, Health and Deaths of Despair – IESE Business School
• Nearly two-thirds of renters say they can’t afford to buy a home – Wall Street Journal

On other countries:

• [Botswana] Housing delivery to the low income in Botswana – Emerald Insight
• [China] Housing conditions and life satisfaction in urban China – Cities
• [China] Accounting for China’s real estate boom – Financial Times
• [China] Macro-economic index effect on house prices in China – Universiti Teknologi Malaysia
• [China] Has Monetary Policy Caused Housing Price to Rise or Fall in China? – The Singapore Economic Review
• [China] Exploring the relationship between urban land supply and housing stock: Evidence from 35 cities in China – Habitat International
• [France] Taxing Vacant Dwellings: Can fiscal policy reduce vacancy? – RePec
• [Hong Kong] The impact of government housing policy and development controls on the dynamics of Hong Kong’s residential property market – The Hong Kong Polytechnic University
• [Italy] Average Time to Sell a Property and Credit Conditions: Evidence from the Italian Housing Market Survey – LUISS Guido Carli
• [Vietnam] Vietnam’s rapid growth fuels Ho Chi Minh property boom – Financial Times

Photo by Aliis Sinisalu

The IMF’s latest report on Mongolia says that “(…) housing prices stabilized after years of deflation, in line with stronger economic activity and household lending.”

From the IMF’s latest report on Luxembourg:

“Demand for housing has exceeded supply for many years. While house prices are in line with fundamentals, they have risen faster than disposable income for years, largely because of structural supply constraints in the context of strong demand, in part reflecting net demographic growth. The dynamics of house prices is also somewhat affected by cyclical factors such as the cost of construction and to some extent the low interest rate environment. Rigid zoning and administrative rules together with land hoarding prevent sufficient construction, while tax incentives and subsidies fuel demand. Reduced affordability has driven up household indebtedness, in particular among younger households.

Risks in the real estate market should continue to be closely monitored, and further actions taken as needed. Recent measures have appropriately built capital buffers in the banking system while discouraging riskier lending. However, household debt is relatively high and limits to debt-service-to-income ratios should be set if house prices continue to outpace disposable incomes. Going forward, the normalization of interest rates could add to the debt service of some households (who borrowed at variable rates) while banks’ margins on their stock of fixed rate mortgages would shrink.

Containing house price pressures and alleviating bottlenecks of housing require a strong effort to expand the stock of housing:

• Excessive red tape in bringing additional land to construction should be pruned, and incentives strengthened. The initiatives of Baulücken for new construction are a step in the right direction;
• Local zoning decisions should be better coordinated with a national spatial development plan and cooperation among municipalities should be encouraged;
• Existing tools to mobilize vacant land and unoccupied dwellings could be strengthened. This includes implementing taxation on vacant lots. In this respect, the initiative of Baulandvertrag goes in the right direction;
• In the PDAT and the municipal implementation, assigning “mixed construction” land in priority to residential real estate would widen the share of land eligible for housing development;
• Tax biases at the municipality level against residential real estate should be reduced further. The reform of the distribution of municipal business taxes among municipalities is a step in the right direction as it reduces incentives favoring commercial over residential real estate zoning decisions. Going forward, policies should increase the share of the ICC redistributed in the equalization fund;
• Increasing property taxes and revising cadastral values would help municipalities increase own resources.

The share of social and affordable housing in total housing could be increased:

• To encourage social housing in the rental segment, public developers in the social sector (FSH, SNCHM, and municipalities) should be gradually steered only towards the development and management of social rentals. This would help clarify management roles and separate more clearly the rental activity from the construction-for-sale business.”

In my new paper with Nathalie Gonzalez Prieto and Saurabh Mishra, “We find that Okun’s Law holds quite well for most U.S. states but the Okun coefficient—the responsiveness of unemployment to output—varies substantially across states. We are able to explain a significant part of this cross-state heterogeneity on the basis of the state’s industrial structure. Our results have implications for the design of state and federal policies and may also be able to explain why Okun’s Lawat the national level has remained quite stable over time despite an enormous shift in the structure of the U.S. economy from manufacturing to services.”

Fig. 3 National-level employment elasticities

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From the Independent Evaluation Office report on the IMF and Fragile States:

Executive Summary

“This evaluation assesses the IMF’s engagement with countries in fragile and conflict-affected situations (FCS). Helping these countries has been deemed an international priority because of their own great needs and the dangerous implications of persistent fragility for regional and global stability. With its crisis response and prevention mandate, the IMF has a key role to play in these international efforts. In practice, its contribution has been subject to considerable debate, and critics have called on the Fund to increase its engagement.”

Key Findings

“The evaluation recognizes the important contributions that the IMF has made in fragile states, including helping to restore macroeconomic stability, build core macroeconomic policy institutions, and catalyze donor support. In these areas, the IMF has provided unique and essential services, playing a critical role in which no other institution can take its place. Though the progress made by many FCS to escape fragility has been disappointingly slow and subject to reversal, it must be recognized that work on fragile states is inherently challenging, given their generally limited capacity, weak governance, and often unstable political and security environment. Moreover, the outcome of any IMF intervention is critically influenced by political, military, and security decisions including by international actors outside the Fund’s control. Against these challenges, the IMF on balance has performed its various roles quite effectively, particularly in years soon after countries first emerged from periods of violence and isolation.”

“Despite this overall positive assessment, the IMF’s approach to fragile member states seems conflicted and its impact falls short of what could be achieved. Even though the IMF has declared in several pronouncements that work on FCS would receive priority, it has not consistently made the hard choices necessary to achieve full impact from its engagement. FCS typically require long-term, patient modes of engagement that do not fit well with the IMF’s standard business model. Efforts have been made in the past to adapt IMF policies and practices to FCS needs, but initiatives have not been sufficiently bold or adequately sustained, leaving questions about the credibility of the Fund’s commitment in this area.”

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