The Unassuming Economist

The IMF’s latest report on Kosovo says:

“With strong growth in property lending (beyond mortgages, this includes commercial and residential construction loans, consumer credit used for housing finance, suppliers’ credit) amid signs of a supply overhang in the capital, the authorities should closely monitor the market and develop a housing price index or create a centralized registry of property valuations to convey the price signal of the property market.”

On cross-country:

• Global House Price Index-Q3 2018 – Knight Frank
• Border Effects in House Prices – Real Estate Economics

On the US:

• Special Issue: The Appropriate Role of Government in U.S. Mortgage Markets – Federal Reserve Bank of New York
• Shiller Hystericizes The US Housing Market – EconoSpeak
• Minneapolis 2040: The most wonderful plan of the year – Brookings Institute
• Minneapolis, Tackling Housing Crisis and Inequity, Votes to End Single-Family Zoning – New York Times
• Income Inequality, Mortgage Debt and House Prices – London School of Economics
• More Than a Third of American Households Were Cost-Burdened Last Year – Harvard Joint Center for Housing Studies
• Risk is building in the housing market – American Enterprise Institute
• Connecting the dots on home builder performance – American Enterprise Institute
• Homelessness Rises More Quickly Where Rent Exceeds a Third of Income – Zillow
• Progressive Minneapolis Just Passed One of the Most Deregulatory Housing Reforms in the Country – Reason
• Housing Sentiment Up Slightly on Reported Household Income Gains – Fannie Mae

On other countries:

• [Australia] The potential of new technologies to disrupt housing policy – AHURI
• [China] House prices and marriage entry in China – Regional Science and Urban Economics
• [Thailand] Thailand’s house prices rising strongly again – Global Property Guide
• [United Kingdom] Property prices where you live compared to where you work – Financial Times 

Photo by Aliis Sinisalu

From Bob Shiller on the US housing market:

On the current housing boom:

“(…) this is the United States’ third biggest housing boom in the modern era. (…) All we do know is that prices have been roaring higher at a speed rarely seen in American history.”

On possible explanations:

Low interest rates: “There is some apparent merit to this view, since these three biggest nationwide housing booms all included very low interest rates. But the market reaction to interest rates is hardly immediate or predictable. The housing market does not react as directly as you might expect to interest rate movements. Over the nearly seven years of the current boom, from February 2012 to the present, all major domestic interest rates have increased, not decreased. So, while interest rates have been low, they have moved the wrong way, yet the boom has continued.”

Economic growth: “Another explanation is simple economic growth. But, as a matter of history, prices of existing homes—as opposed to the supply of newly built homes— have generally not responded to economic growth. There was only a 20% increase in real prices of existing homes in the 50 years from 1950 to 2000 despite a sixfold increase in real GDP.”

Return to normal: “The simplest narrative being given for the current boom is just that the 2008-2009 financial crisis and the so-called Great Recession are over and home prices are returning to normal. But that explanation does not cut it either. In September they were 11% higher than at the 2006 peak in nominal terms, and almost as high in real terms. This is not a return to normal, but a market that appears to be rising to a record.”

President Trump: “It is difficult to assess the contribution of President Trump to the current boom. (…) The Trump administration’s attitude toward housing is less clear. President Trump’s slogan “Make America Great Again” has overtones of the “American dream.” But provisions of his Tax Reform and Jobs Act of 2017 were unfriendly to homeowners.”

On cross-country:

• The state of the housing market in the euro area – European Central Bank
• We let kids design our city — here’s what happened | Mara Mintzer – TEDxMileHigh
• Inflation measures should add house prices to prevent bubbles – Financial Times
• Q3 2018: World’s housing markets poised to slow, but strong house price rises continue in Europe and parts of Asia – Global Property Guide
• Blueprint for Better Housing: New Urban Agenda – The American Institute of Architects

On the US:

• The housing market is having a wobble – Economist
• Non-bank firms are now big players in America’s mortgage market – Economist
• How Many Young Homebuyers Get Support from Their Parents and How Much of a Difference Does It Make? – Harvard Joint Center for Housing Studies
• Amazon’s Northern Virginia headquarters could exacerbate existing economic disparities – Brookings
• Are Housing Price Cycles Asymmetric? Evidence from the US States and Metropolitan Areas – IDEAS
• The Major Challenge of Inadequate U.S. Housing Supply – FreddieMac
• Should California subsidize housing with ‘rent stamps’? – San Francisco Chronicle

On other countries:

• [France] The Costs of Agglomeration: House and Land Prices in French Cities – Review of Economic Studies
• [Germany] Germany’s house price rises continue – Global Property Guide
• [Hong Kong] Hong Kong’s red-hot property market – Global Property Guide
• [Ireland] Review of residential mortgage lending requirements – Central Bank of Ireland

Photo by Aliis Sinisalu

From a new paper by Christophe André, Rangan Gupta, and John Weirstrasd Muteba Mwamba:

“This paper investigates asymmetry in US housing price cycles at the state and metropolitan statistical area (MSA) level, using the Triples test (Randles et al., 1980). Several reasons may account for asymmetry in housing prices, including non-linearity in their determinants and in behavioural responses, in particular linked to equity constraints and loss aversion. However, few studies have formally tested the symmetry of housing price cycles. Evidence of asymmetry at the 5% confidence level is found in nearly half of the states, 37% of the MSAs and in the aggregate national series. Geographical patterns and comparisons with results obtained by Cook (2006) for the United Kingdom suggest that asymmetric cycles tend to prevail in areas where housing supply elasticity is low. In addition, asymmetric cycles with steep downturns are found in several states of the Midwest, where the decline in traditional industries has severely hit the economy. These results call for considering potential non-linearity when analysing, modelling and forecasting housing prices.”