The Unassuming Economist

From a new post by David Andolfatto:

“Does the recent flattening of the yield curve portend recession? Not necessarily. The flattening of the real yield curve may simply reflect the fact that real consumption growth is not expected to accelerate or decelerate from the present growth rate of about 1% per annum. On the other hand, a 1% growth rate is substantially lower than the historical average of 2% in the United States. Because of this, the risk that a negative shock (of comparable magnitude to past shocks) sends the economy into technical recession is increased. While the exact date at which the shock arrives is itself is unpredictable, the likelihood of recession is higher relative to a high real interest rate, high growth economy.”

From a new VOX post:

“The most widely available measure of underemployment is the share of involuntary part-time workers in total employment. This column argues that this does not fully capture the extent of worker dissatisfaction with currently contracted hours. An underemployment index measuring how many extra or fewer hours individuals would like to work suggests that the US and the UK are a long way from full employment, and that policymakers should not be focused on the unemployment rate in the years after a recession, but rather on the underemployment rate. ”

“Figure 2 shows our estimates for the UK of the number of desired hours of those who want more hours (the underemployed) and those who want less (the overemployed) at the going wage.  The latter series was broadly flat until recently but was always above the fewer hours series before 2008.  That suggests there is still a good deal of under-utilized resources in the labour market available to be used up before the UK reaches full-employment.  There has been a rise both in the number of hours of those who want more hours and those who want less in the post-recession years. ”

From a new Microeconomic Insights post by Charles Jones and Pete Klenow:

“Economists are often accused of focusing excessively on GDP, with the result that government policies make GDP a priority to the detriment of other contributors to well-being. This research proposes a broader summary statistic that incorporates consumption, leisure, mortality and inequality. While the new statistic is highly correlated with GDP per capita, cross-national deviations are often large: Western Europe looks considerably closer to the United States; emerging Asia has not caught up as much; and many developing countries are further behind. Each component of the statistic plays a significant role in explaining these differences, with mortality being the most important. While still imperfect, the statistic arguably provides better guidance for determining public priorities and evaluating policies than does GDP alone.”

On cross-country:

• Q2 2018: Global house price boom – strong house price rises continue in Europe and parts of Asia – Global Property Guide
• Eurozone housing market cycle is maturing – ING
• Disillusion mounts in Europe’s housing market – ING

On the US:

• Price-to-Income Ratios are Nearing Historic Highs – Harvard Joint Center for Housing Studies
• Why do so many affordable-housing advocates reject the law of supply and demand? – Washington Post
• The Mortgage Market Is Back a Decade After the Credit Crisis—With New Risks – Bloomberg
• Jeff Bezos Homeless Pledge Follows Amazon Fight Against Housing Tax – Bloomberg
• Census: Renters’ Incomes Still Lagging Behind Housing Costs – Center on Budget and Policy Priorities
• New evidence shows manufactured homes appreciate as well as site-built homes – Urban Institute
• ‘As safe as houses’: How a small corner of the US mortgage market nearly brought down the global financial system – Bank of England
• Does Rising Housing Inventory Signal the Beginning of a Buyer’s Market? – First American
• The Wealth Hiding in Your Neighborhood – Institute for Policy Studies
• Luxury Real Estate Boom Adds to Risk of Climate Disruption – Institute for Policy Studies
• Tough Times Ahead for Housing – Wall Street Journal

On other countries:

• [Brazil] Brazil’s house prices still falling, but outlook positive – Global Property Guide
• [China] China’s Weakest Housing Markets Flash Red in Cautionary Tale – Bloomberg
• [China] One of China’s Wildest Housing Markets Is Broken – Bloomberg
• [China] How China’s plan to develop rental housing backfired – Reuters
• [Chile] Chile’s house prices continue to rise modestly, despite the imposition of 19% VAT on property sales – Global Property Guide
• [Ireland] Ireland sets up land agency as anger grows at housing shortage – Reuters
• [Ireland] Dublin’s Housing Crisis Reaches a Boiling Point – CityLab
• [Malta] Malta house price growth outstrips Hong Kong to take top ranking – Financial Times
• [New Zealand] New Zealand’s house prices are rising again – Global Property Guide
• [South Korea] Korea imposes tougher taxes on properties to curb price surge – Reuters
• [Ukraine] Ukraine’s house price falls accelerating – Global Property Guide
• [United Kingdom] Is UK property still a good investment? – Financial Times
• [United Kingdom] K. House Prices at Risk From Brexit – Bloomberg

Photo by Aliis Sinisalu

From the IMF’s latest report on Norway:

“House prices in Norway have been growing rapidly in recent years. As of May 2018, nationwide house prices were 55 percent higher than in 2010. The national house price to income ratio remains historically and internationally high. Although house prices fell in 20172— particularly in Oslo, which saw nominal house price declines of 10.5 percent—the correction was short lived. House prices rose again by 7.5 percent during January to May of 2018 on a seasonally-adjusted basis.

There has been a significant regional divergence of house price trends since 2013. Real house prices in Oslo now stand 60 above their 2010 level—compared to 35 percent for the whole of Norway. House prices in Oslo have been increasing particularly quickly compared to other regions since 2013. This represents a contrast to the last period of rapid house price appreciation—before the global financial crisis—when house prices grew evenly across Norway.

Large differences in house prices across regions can have macroeconomic implications. There is growing evidence that large house price differentials can limit regional labor mobility, thus slowing income and productivity convergence (Ganong and Shoag, 2015; Hsieh and Moretti, 2017). House price differentials—to the extent they translate into higher household debt and debt servicing costs—can make some local economies more sensitive to abrupt house price corrections than the others, thus providing arguments in favor of region-specific rather than nation-wide policies to mitigate financial vulnerabilities.

In this analysis we estimate the extent to which the recent regional house price divergence in Norway can be explained by fundamental factors. Section B looks at the recent trends in regional house prices, demand and supply factors more in detail. Section C describes our econometric approach to estimating regional equilibrium house prices, and provides main findings on the extent of house price over- or under-valuation across Norwegian regions. Section D studies the impact of house price differentials on labor mobility in Norway. Section E concludes.”