The Unassuming Economist

Global Housing Watch Newsletter: June 2018

Looking for something to read over the summer? We asked experts for suggestions on books and papers to read on housing markets. Below are their picks:

Modeling Spatial Housing Markets: Theory, Analysis and Policy by Geoffrey Meen
Nominated by: John V. Duca (Federal Reserve Bank of Dallas)
Why? “The book provides a well-organized, systematic treatment of what drives house prices at national, regional, and metro levels. It describes and illustrates the importance of having reasonably complete data sets and well-specified models for estimating robust and useful housing relationships.”

Color of Law: A Forgotten History of How Our Government Segregated America by Richard Rothstein
Nominated by: Svenja Gudell (Zillow Group Chief Economist)
Why? “Rothstein outlines a history of housing discrimination that many people had forgotten – from government redlining to racial covenants – and shows how they have shaped our cities and neighborhoods. He makes the case that residential integration progressed from 1880 into the mid-twentieth century, then stalled. As we mark the 50th anniversary of the Fair Housing Act, this history offers important context for researching and trying to address our current housing issues. It’s a book everyone should read, not just economists and housing experts.”

The effect of housing supply regulation on housing affordability: A review by Raven Molloy
Nominated by: Christian Hilber (London School of Economics)
Why? “I recommend this short review article to scholars interested in understanding why the cost of housing has posed a growing weight on household budgets in recent decades and why genuine housing affordability crises have emerged in many desirable (superstar) cities such as London, San Francisco, or Shanghai. While many commentators recently pointed to lax credit conditions, low interest rates, or foreign investors—all affecting demand for housing—as ‘culprits’, this article focuses on the important role of housing supply regulation. It succinctly reviews the theoretical and empirical literature, identifies gaps in the literature, and provides some directions for further research.”

Evicted: Poverty and Profit in the American City by Matthew Desmond
Nominated by: Steve Malpezzi (University of Wisconsin-Madison)
Why? “Based on Desmond’s months of field research, Evicted recounts the stories of low-income tenants and their landlords in Milwaukee during nine months of 2008-9. From the book: “If incarceration had come to define the lives of men from impoverished black neighborhoods, eviction was shaping the lives of women. Poor black men were locked up. Poor black women were locked out.” Compelling stuff, but the book is even more powerful for the fact that Desmond spends half of his research time in a poor white trailer park, drawing many important parallels between the lives of poor whites and poor blacks, men and women; without neglecting the differences. Desmond goes beyond the simple stereotypical portraiture of rapacious landlords and benighted tenants, to paint complex and realistic portraits of both.”

No Price Like Home: Global House Prices 1870-2012 by Katharina Knoll, Moritz Schularick, and Thomas Steger
Nominated by: David Miles (Imperial College London)
Why? “This paper presents very carefully constructed estimates of house prices across 14 advanced economies since 1870. It uncovers a wealth of new facts about how housing markets have developed over the past 150 years. It presents a challenge to economists to explain some different patterns in prices at different times, in particular why it was that real house prices showed no consistent upwards trend in the period from 1870 to around the middle of the twentieth century but then tripled in the next 60 years.”

Supply restrictions, subprime lending and regional US house prices by André Kallåk Anundsen and Christian Heebøll
Nominated by: John Muellbauer (Nuffield College, Oxford)
Why? “This article analyses metropolitan house prices in the US providing micro-evidence of one aspect of the financial accelerator. They estimate a 3-equation model for the 2000-2006 boom period, including equations for the housing stock and cumulative sub-prime lending volumes, to capture shifting credit conditions, controlling for heterogeneity in supply elasticities. Lagged house price appreciation, a proxy for extrapolative expectations, has consequences for the credit equation, evidence for a financial accelerator, as well as the house price equation. Thus, house prices and credit are mutually reinforcing; tighter supply restrictions lead to a stronger financial accelerator.”

Days of Slaughter by Susan Wharton Gates
Nominated by: Frank E. Nothaft (CoreLogic)
Why? “September 2018 marks the 10th anniversary of the federal government’s placement of Fannie Mae and Freddie Mac into conservatorship. Yet not that long before that, the U.S. secondary mortgage market was the envy of many countries, an example of how other nations should set up their own mortgage markets. For a generation prior to the federal takeover, Fannie Mae and Freddie Mac provided an inexpensive and stable flow of funds to America’s homeowners. Days of Slaughter provides an insider’s view as to what were some economic, political, and management issues that led to the collapse of Freddie Mac.”

Metropolitan land Values by David Albouy, Gabriel Ehrlich and Minchul Shin
Nominated by: Albert Saiz (Massachusetts Institute of Technology)
Why? “This is a really interesting paper for everyone who wants to understand housing affordability in the United States. The authors use a new database of market transactions to study the importance of land costs on the overall price of housing. The authors do not use residual estimates, but actual land transactions, which makes their estimates more reliable.”

The New Urban Crisis: How Our Cities Are Increasing Inequality, Deepening Segregation, and Failing the Middle Class and What We Can Do About It by Richard Florida
Nominated by: Robert J. Shiller (Yale University)
Why? “I would recommend Richard Florida’s 2017 book: The New Urban Crisis, which tells us about a relation between rising inequality and urban dynamics. Rising inequality may be the most important economic issue facing the world today. His detailing the urban dimension of this is striking. His “winner-take-all urbanism” is connected to the geographical polarization of America today, and no doubt applies to other countries as well. Florida lives in Canada, where there is a similar real estate boom in superstar cities going on today.”

Milestones in European Housing Finance by Jens Lunde and Christine Whitehead
Nominated by: Susan Wachter (University of Pennsylvania)
Why? “In their edited volume, Milestones in European Housing Finance, Jens Lunde and Christine Whitehead offer a perspective of the past 25 years in European housing finance – a period including the transition from socialism, moves towards development of a common economic framework across the continent and of course, the Global Financial Crisis (GFC). By including treatises – provided by the most prominent country experts – on the development of individual nations’ housing finance systems as well as thematically-focused chapters, Lunde and Whitehead develop a view of not only the past quarter century, but also of keys for envisioning the future. This volume underlines the significance of cross-country comparisons in developing a path forward for housing finance systems across the globe.”

Photo by Pj Accetturo