The Unassuming Economist

On cross-country:

• As the U.S. Dollar Surges, American Buyers Splurge on European Homes. Favorable exchange rates and steady property prices have led to big interest in markets like London, Paris and Tuscany – Wall Street Journal

On the US—developments on house prices and rent:    

• Case-Shiller National House Price Index “Decelerated” to 18.0% year-over-year increase in June. FHFA: “[A] deceleration has appeared in the June monthly data” – Calculated Risk
• The Huge Upward Momentum in House Prices is Gone – Check Your City – Real Estate Decoded
• Home Price Growth Eased in June – NAHB
• Inflation Adjusted House Prices Declined in June. House Price-to-Rent Ratio also Declined in June – Calculated Risk
• U.S. house price inflation to plunge in 2023, fair value still a distant dream – Reuters
• A ‘buyers’ market’ for homes is still elusive in the US. Home prices are falling with tighter monetary policy, but higher interest rates don’t fix shortages – FT 
• American cities want rent control to rein in housing costs. Economists still think they are a bad idea – The Economist
• Pace of Rent Increases Continues to Slow. Higher Rents will continue to impact measures of inflation in 2022 – Calculated Risk
• July Rental Report: Nationwide Rent Holds Steady Despite Big-City Resurgence – Realtor
• Record-Breaking Rent Growth in Markets in the South and West – Harvard Joint Center for Housing Studies
• Stucco and Vinyl were the Most Common Siding Materials on New Homes in 2021 – NAHB

On the US—other developments:    

• The Housing Market Is in Recession. What It Means For Home Buyers. – Barron’s
• Shorting Zillow Is Your Best Bet in Housing This Year. Think the real-estate market is in for a price cut? The biggest one could still come to Zillow’s stock – Wall Street Journal
• Andra Ghent: Salt Lake City should sell golf courses to provide affordable housing. It is a lot cheaper to prevent people from becoming homeless than to help them afterward. – Salt Lake Tribune
• American Real Estate Was a Money Launderer’s Dream. That’s Changing. – New York Times  
• California rolls out a daring new housing policy to combat high home prices and increase supply – Fortune
• Big US mortgage lenders turn screws on smaller rivals as rates rise. United Wholesale and Rocket pursue aggressive strategies as others pull back or go out of business – FT
• Consumer Bankruptcy, Mortgage Default and Labor Supply – Philadelphia Fed
• 2022 Housing Markets Remain in Sellers Favor, but Conditions Are Changing. Home Sellers Are Contending with Slowing Real Estate Fundamentals – Realtor
• Everyone’s a Landlord—Small-Time Investors Snap Up Out-of-State Properties. With the help of recent technologies, laptop landlords are buying homes across the U.S. – Wall Street Journal
• Affordable Housing Developers Look to the White House for Help. Construction costs and labor shortages have made it harder to build affordable housing. Now the Biden administration is urging cities to use American Rescue Plan funds to boost supply. – Bloomberg     
• Goldman Says US Housing Downturn Has Further to Go as Rates Rise – Bloomberg
• Why Obama-Era Economists Are So Mad About Student Debt Relief. It exposes their failed mortgage debt relief policies after the Great Recession. – The American Prospect
• Yes, your house is wealth. In order to fix our dysfunctional housing politics, we must confront this economic fact. – Noah Smith
• New Estimates of the US Homeless Population – NBER
• Active vs Total Existing Home Inventory – Calculated Risk
• Private Residential Spending Slides in July – NAHB

On China:

• China’s Property Market Has Slid Into Severe Depression, Real-Estate Giant Says. Country Garden, which for years ranked as China’s top real-estate developer, reports 96% drop in first-half profit – Wall Street Journal
• China’s largest banks show wounds from property sector crisis – Reuters
• China’s AgBank Says Overdue Loans From Mortgage Boycott Double. Lender posts 5.8% profit gain in first half on lending boost. Sector faces tumult from slowing economy, property crisis – Bloomberg
• Pinched by Housing Downturn, Chinese Families Rein In Spending. More homeowners in China are reckoning with shrinking wealth amid a nearly year-long home-price decline, adding another drag on consumption – Wall Street Journal
• China’s property-driven growth model is broken. Beijing should prepare for a long and difficult economic transformation – FT
• Hong Kong tycoon calls bottom of China’s property slump. Adrian Cheng says his New World Development group will spend $1.5bn to buy land in the next year – FT
• Point of no return: crunch time as China tries to fend off property crash. With the global economy also at a crossroads, Beijing’s leadership faces a perilous test of nerve on its lending crackdown and zero-Covid strategy – The Guardian
• Chinese borrowers pile pressure on banks with early mortgage payments. Affluent property owners cut leverage as liquidity crisis hammers property sector and economy sputters – FT
• As China’s property crisis grows, is the global economy at risk? China’s house prices are falling as Beijing reins in sector, raising fears for economic growth at home and globally. – Al Jazeera  

On other countries:  

• [Australia] Australia’s house prices take biggest dive in 40 years. Property prices drop 1.6 percent in August in sharpest fall since 1983. – Al Jazeera and The Guardian
• [Australia] Australia’s property downturn puts home buyers in double mortgage bind – The Guardian
• [Canada] Canadian Housing Outlook: Testing the Foundation – TD
• [Israel] Bank of Israel’s Yaron on Policy, Inflation, Housing – Bloomberg
• [Netherlands] The Netherlands’ housing market remains fundamentally strong – Global Property Guide
• [United Kingdom] Alarm Bells Ring for UK Housing as Signs Point to Falling Prices. Inflation surge and higher interest rates are taking a toll. Industry survey shows buyer interest and price optimism waning – Bloomberg
• [United Kingdom] Equity release loans surge as older homeowners raise funds. Borrowers appear undeterred by rising interest rates – FT
• [United Kingdom] UK house price surge to end as cost of living crisis bites: Reuters poll – Reuters
• [United Kingdom] UK House Prices Rise More Than Forecast But Slowdown Anticipated – Bloomberg

From Noah Smith:

“Every so often I encounter the argument that owner-occupied housing isn’t a form of wealth. This would come as news to economists like Emmanuel Saez and Gabriel Zucman, who study wealth inequality for a living, and who definitely count owner-occupied home equity in their wealth numbers. It would also come as news to the U.S. Census Bureau, who finds that equity in owner-occupied housing represented the largest share of the wealth of households outside the top 1% as recently as 2015:

The definition of wealth here is just assets minus liabilities. An asset is anything you can sell for money. You can sell your house for money. Hence it is an asset. In fact, historically, it’s one of the assets with the best returns.

But I don’t want to make an argument from authority here. There are very good reasons we count owner-occupied housing as wealth, and they’re not too hard to understand.

To see why, first let’s make an analogy: a magic cupboard that gives you food.

The magic cupboard analogy

Suppose you had a magic cupboard that gave you three meals a day, free of charge. Furthermore, suppose there was a market for magic cupboards, and that you could sell your own for $1 million if you wanted to.

This magic cupboard represents a form of wealth. If you think it’s not, consider whether you would be poorer if your magic cupboard burned down or got stolen or stopped working. Yes, you would be poorer.

Some people might argue: “But you need food every day. If you sold your magic cupboard, you’d just have to use the money to buy food.” And indeed you would. You would have to go to the grocery store or go to restaurants, because you wouldn’t have a magic cupboard. You could use the cash from the sale of your magic cupboard to buy food at the store or at restaurants.

But now consider someone who doesn’t own a magic cupboard. They also have to eat every day. They have to go to the grocery store or go to restaurants. But unlike you if you sold your magic cupboard for cash, the person who didn’t start out with a magic cupboard has to work for the cash they need to buy food every day. Because they have to work for what you could just buy off of an asset sale, they’re poorer than you.

Thus, the magic cupboard is wealth.”

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