The Unassuming Economist

From the IMF’s latest report on Bulgaria:

“Credit growth has picked up. Both consumer and mortgage loan growth has been buoyant, accompanied by strong housing price increases (averaging 7.5 percent y/y since 2016). Credit to corporates has also been recovering and reached 5.4 percent y/y in 2018, the highest level since 2013, while credit standards have slightly tightened or remained unchanged recently. But non-financial corporate debt remains high among the new member states (NMS)—notwithstanding a marked decline from 106 percent of GDP in 2008 to 80 percent of GDP in 2017. Overall credit-to-GDP ratio remains below the historical trend, with the ratio substantially below the peak reached in 2010.”

From Conversable Economist:

“M. King Hubbert was a big-name geologist who worked much of his career for Shell oil. Back in the 1970s, when OPEC taught the US that the price of oil was set in global markets, discussions of US energy production often began with the “Hubbert curve,” based on a 1956 paper in which Hubbert predicted with considerable accuracy that US oil production would peak around 1970. The  2019 Economic Report of the President devotes a chapter to energy policy, and offers a reminder what happened with Hubbert’s curve.

The red line shows Hubbert’s predicted oil production curve from 1956. The blue line shows actual US oil production in the lower 48 states. At the time of Hubbert’s death in 1989, his forecast looked spot-on. Even by around 2010, his forecast looked pretty good. But for those of us who had built up a habit since the 1970s of looking at US oil production relative to Hubbert’s prediction, the last decade has been a dramatic shock.

Continue reading here.

On cross-country:

• The Total Risk Premium Puzzle – NBER
• Book review: Order without Design: How Markets Shape Cities by Alain Bertaud – New Geography
• New driveway? Home improvements lead AI to hidden gentrification – Reuters
• Inclusionary Housing Policies in Gothenburg, Sweden, and Stuttgart, Germany: The importance of Norms and Institutions – Nordic Journal of Surveying and Real Estate Research
• We don’t have enough to buy a house. How can we invest with similar returns to real estate? – Globe and Mail

On the US:

• The Fed has exacerbated America’s new housing bubble – Financial Times
• The Affordable Home Crisis Continues, But Bold New Plans May Help – Citylab
• US new home sales fall more than forecast in January – Financial Times
• RE Lending Risks Monitor – Federal Reserve Bank of San Francisco
• Do Credit Conditions Move House Prices? – MIT
• Mortgage Loss Severities: What Keeps Them So High? – Federal Reserve Bank of Philadelphia
• Part 3: Renting Vs. Buying. How Important Is Owning A Home? – wbur
• Bay Area leads charge on fixing housing crisis. Will it work for the rest of California? – Los Angeles Times
• Storper Challenges Blanket Upzoning as Solution to Housing Crisis – UCLA
• How Do Homeowners Spend Their Remodeling Dollars? – Harvard Joint Center for Housing Studies

On other countries:

• [Australia] Property, Debt and Financial Stability – Reserve Bank of Australia
• [Australia] Australia’s falling home prices not yet a threat to banks: RBA – Reuters
• [Australia] Australian Housing Slide Deepens as RBA Worries About Consumers – Bloomberg
• [Australia] Australia’s Housing Slump Isn’t Fazing Mortgage Bond Investors – Bloomberg
• [Australia] How Do Crime Rates Affect Property Prices? – Infrastructure Victoria
• [Australia] Foreign investment in Australian residential properties: House prices and growth of housing construction sector – University of Technology, Melbourne
• [Canada] The Age of Leverage – Bank of Canada
• [Canada] Previous housing data understated amount of non-resident buyers in Vancouver and Toronto – Globe and Mail
• [Canada] Trudeau Targets Home-Buying Millennials With Equity Plan – Bloomberg
• [Canada] Not in my neighbour’s back yard? Laneway homes and neighbours’ property values – University of British Columbia
• [China] Housing Policy and Economic Growth in China – Reserve Bank of Australia
• [China] Deeper Cracks in China’s Housing Foundations – Wall Street Journal
• [China] China new house prices pick up pace in February – Financial Times
• [Czech Republic] Czech apartment price rise continues – ING
• [Iceland] Iceland’s house prices rises decelerating rapidly – Global Property Guide
• [India] As property prices rise, more Indian women claim inheritance – Reuters
• [Ireland] Irish house prices cool further as wider inflation remains muted – Reuters
• [Italy] Renaissance Venice had its own “Airbnb problem”—and a solution … – Quartz
• [Japan] Japan’s Regional Land Prices Rise for First Time Since Property Bubble Burst in ’90s – Bloomberg
• [Malaysia] Housing prices in peninsular Malaysia: supported by income, foreign inflow or speculation? – Tunku Abdul Rahman University College
• [Mexico] Mexico’s housing market is strengthening – Global Property Guide
• [Netherlands] Amsterdam Is Trying to Crack Down on Its Rentals Market – Bloomberg
• [Slovak Republic] Slovak Republic’s house price rises continue – Global Property Guide
• [Switzerland] World’s Lowest Interest Rate Brews Trouble for Swiss Property – Bloomberg
• [United Kingdom] Revealed: the fastest ‘double your money’ years for UK property – Financial Times
• [United Kingdom] Properties, prices and pesky Instagrammers – Financial Times
• [United Kingdom] Elephant and Castle shifts from social housing to ‘build to rent’ – Financial Times
• [United Kingdom] How does the land supply system affect the business of UK speculative housebuilding? – UK Collaborative Centre for Housing Evidence
• [Venezuela] Crisis en Venezuela: la tentadora oferta de viviendas de lujo a precio de saldo (y qué tiene que ver el “efecto Guaidó”) – BBC

From a new IMF working paper by Weicheng Lian:

“This paper separates the roles of demand for housing services and belief about future house prices in a house price cycle, by utilizing a feature of user-cost-of-housing that it is sensitive to demand for housing services only. Optimality conditions of producing housing services determine user-cost-of-housing and the elasticity of substitution between land and structures in producing housing services. I find that the impact of demand for housing services on house prices is amplified by a small elasticity of substitution, and demand explained four fifths of the U.S. house price boom in the 2000s.”

From a new NBER paper by Òscar Jordà, Moritz Schularick, Alan M. Taylor:

“The risk premium puzzle is worse than you think. Using a new database for the U.S. and 15 other advanced economies from 1870 to the present that includes housing as well as equity returns (to capture the full risky capital portfolio of the representative agent), standard calculations using returns to total wealth and consumption show that: housing returns in the long run are comparable to those of equities, and yet housing returns have lower volatility and lower covariance with consumption growth than equities. The same applies to a weighted total-wealth portfolio, and over a range of horizons. As a result, the implied risk aversion parameters for housing wealth and total wealth are even larger than those for equities, often by a factor of 2 or more. We find that more exotic models cannot resolve these even bigger puzzles, and we see little role for limited participation, idiosyncratic housing risk, transaction costs, or liquidity premiums.”