The Unassuming Economist

On cross-country:

• Analysis: ECB has to fight housing bubble with its hands tied – Reuters
• Owner-occupied housing and inflation measurement – European Central Bank
• A New Angle on Excess Consumption Volatility in Emerging Countries: Does House Price Matter? – Journal of International Money and Finance
• House Prices, Housing Wealth and Financial Well-being – Journal of Urban Economics

On the US:    

• Dysfunctional policies have broken America’s housing supply chain – Brookings
• Is There a Way Out of America’s Impossible Housing Mess? The first step, according to economist Jenny Schuetz, is recognizing there is more than one housing crisis. – Slate
• The Housing Boom’s Mortgage Rate Threat Is Worse Than It Seems. Soaring borrowing costs might hurt demand, but they’re not helping supply either. – Bloomberg
• Mortgage Rates Close In on 4%, Making Home Affordability Tougher. Average rate of 30-year fixed loan climbs to highest since May 2019 – Wall Street Journal
• Mortgage Rates Will Rain on This House Party. Housing indicators suggests strong demand and tight supply, but higher mortgage rates are likely to start showing in the data – Wall Street Journal
• Rents Have Soared Across the Country, But Home Prices Grew Even Faster – Harvard Joint Center for Housing Studies
• January Existing Home Sales: Defying Conventional Wisdom – Zillow
• U.S. existing home sales accelerate; investors elbowing out first-time buyers – Reuters
• Wall Street Is Buying Starter Homes to Quietly Become America’s Landlord. Private equity money is pouring into the Phoenix real estate market, turning first-time homebuyers into renters. – Bloomberg
• The Next Affordable City Is Already Too Expensive. In Spokane, Wash., home prices jumped 60 percent in the past two years. The increase is fueled by buyers fleeing the boom in cities like Austin. Who will have to flee next? – New York Times
• Housing: What Fed rate hikes mean for the real estate and rental markets – Yahoo Finance
• Share of all homes bought by investors – Axios
• First-time homebuyers are getting squeezed out by investors – NPR 
• Online Real Estate Isn’t Worth the Chance. Even as the housing market booms in the U.S., dreams of online real-estate riches have faded in the stock market – Wall Street Journal
• America’s housing boom is also a backlog – Axios
• Waters Calls on Regulators and Industry to Hold Appraisers Accountable and Announces Plans for Legislation – US House Committee on Financial Services
• Commercial Real Estate Is Seen as an Inflation Hedge, but That Isn’t Always the Case. With inflation running its hottest in four decades, some investors are starting to question the strength of real estate’s defenses against higher prices – Wall Street Journal
• Addressing the Housing Affordability Crisis as COVID-19’s Impact Continues – St. Louis Fed

On China

• China’s Real-Estate Balancing Act. China’s government has emphasized that policies to address financial vulnerabilities and structural problems should not impede economic growth. But, when it comes to the real-estate sector, that will not be an easy balance to strike – and getting it wrong could have economy-wide repercussions. – Project Syndicate
• China Broadens Real Estate Lending Support to Bigger Cities. PBOC urged banks to accelerate property loans in Shanghai. Major banks in Guangzhou cut mortgage rates for homebuyers – Bloomberg
• Is There an Industrial Land Discount in China? A Public Finance Perspective. Local Chinese governments face a trade-off between supplying residential or industrial land, and this work reveals the importance of taxes and revenue streams over time in shaping those choices. – University of Chicago
• Heze Is First Chinese City to Cut Mortgage Down Payments, Local Media Reports. Major banks in Heze cut mortgage down payment ratio to 20%. More smaller cities may follow suit, research analyst says – Bloomberg
• Banks in nearly 90 Chinese cities cut mortgage rates – Reuters
• HSBC takes charge on Chinese real estate and warns of wealth slowdown. Outlook blemishes otherwise buoyant fourth-quarter earnings as profit doubles and targets boosted – FT

On other countries:  

• [Australia] House prices and rents surge in regional Australia amid influx of arrivals from cities. Locals say they are being priced out as NAB reports 24 of the 25 largest regions have had double-digit housing growth – The Guardian
• [Colombia] Assessing the impact of recent Venezuelan immigration on housing rents in Colombia – Spatial Economic Analysis
• [Cyprus] Recent developments in housing markets and related policy challenges – Central Bank of Cyprus
• [India] Deepak Parekh Says India’s Real Estate Showing Uptrend Amid Global Jitters – Bloomberg
• [Ireland] Will the price of Irish houses just keep on rising? Cliff Taylor: key policy challenge is to provide a supply of homes at more affordable prices – The Irish Times
• [New Zealand] New Zealand’s homeless have been moved off the streets, but the crisis endures – The Guardian
• [Norway] Norway: boosting productivity and workforce participation while improving housing affordability will help maintain high living standards, says OECD – OECD
• [Spain] Effectiveness and supply effects of high-coverage rent control policies – Barcelona Institute of Economics
• [Taiwan] Long- and short-term price behaviors in presale housing markets in Taiwan – Economic Analysis and Policy
• [Turkey] Turkish builder touts land sales as inflation slows house deals – Reuters
• [United Kingdom] London housing market boosted by end of COVID rules, Rightmove says – Reuters
• [United Kingdom] The Guardian view on unaffordable homes: building injustice into the economy – The Guardian

From the IMF’s latest report on Poland:

“The authorities’ proposals to increase housing affordability should consider the impact on the housing market and financial stability. The housing market has returned to pre-pandemic robust conditions (Figure 14). The state development bank plans to offer partial mortgage guarantees in lieu of mortgage down payments to support applicants for smaller mortgage loans, which could increase demand for mortgage loans and fuel further price growth. Mortgages are mostly floating rate, boosting housing affordability during the recent time of extraordinarily low interest rates. However, households could become overstretched as interest rates normalize, risking a deterioration in credit quality. To mitigate these risks, it is important that banks continue conservative creditworthiness assessments in line with supervisory guidelines, including an LTV limit at 80 percent, stressed DSTI at 40–50 percent with an interest rate buffer of 250–300 bps, and loan maturities capped at 25 years. Early signals suggest increasing policy interest rates are likely to dampen demand for mortgage credit.”

by Alex Tabarrok on February 21, 2022, posted on Margin Revolution.

“The WSJ has several good piece on electric power in the United States, many of which are relevant to my recent podcast with Ezra Klein. Starting with the increased unreliability of America’s electric grid.

The U.S. power system is faltering just as millions of Americans are becoming more dependent on it—not just to light their homes, but increasingly to work remotely, charge their phones and cars, and cook their food—as more modern conveniences become electrified.

… Much of the transmission system, which carries high-voltage electricity over long distances, was constructed just after World War II, with some lines built well before that. The distribution system, the network of smaller wires that takes electricity to homes and businesses, is also decades old, and accounts for the majority of outages.

We need more power but are relying on transmission lines we put into places decades ago when we could still build things. The second WSJ article is on the 17-year travail to get a new power cable from hydropower rich Quebec to Boston.

Blackstone made other discoveries that altered the project. Its environmental consultants spent the summer of 2010 watching patches of blue lupine for endangered Karner blue butterflies and frosted elfins, a threatened species. They spotted two Karners and wrote a plan for avoiding damage to the wildflowers upon which the butterflies rely. Arrangements were also made to protect bald eagle nests that might be present during construction and identify shagbark hickories big enough for the endangered Indiana bat to roost.”

Continue reading here.

From a NBER paper by Hites Ahir, Nicholas Bloom and Davide Furceri:

“We construct the World Uncertainty Index (WUI) for an unbalanced panel of 143 individual countries on a quarterly basis from 1952. This is the frequency of the word “uncertainty” in the quarterly Economist Intelligence Unit country reports. Globally, the Index spikes around major events like the Gulf War, the Euro debt crisis, the Brexit vote and the COVID pandemic. The level of uncertainty is higher in developing countries but is more synchronized across advanced economies with their tighter trade and financial linkages. In a panel vector autoregressive setting we find that innovations in the WUI foreshadow significant declines in output. This effect is larger and more persistent in countries with lower institutional quality, and in sectors with greater financial constraints.”

Source: Poverty Action Lab, Paris School of Economics

In 1997, the Mexican government designed the conditional cash transfer program Progresa, which became the
worldwide model of a new approach to social programs, simultaneously targeting human capital accumulation
and poverty reduction. This paper studies the differential long-term impact of children’s exposure to Progresa, 20 years after its launch. The two focus groups include (a) children who were in-utero or in their initial years of life, and (b) children who were transitioning from primary to secondary school.

Results show that children exposed to the program in their early childhood witnessed better educational attainment and labor market outcomes, and the study of impacts on the second group shows that even the short-term impact of the program was sustained in the long run. Positive impacts manifested as larger labor incomes, more geographical mobility including through international migration, and later family formation. Besides, results from this paper also confirm that while conditional cash transfers are helpful in enhancing the educational and nutritional development of children in their formative stages, there is still a need for complementary policies to be rolled out so that the full range of households (not just ones with infants at the time of program rollout) are able to realize the full range of newly available labor market opportunities.

Click here to be a part of the discussion on this paper.