The Unassuming Economist

On cross-country:

• Newsletter on credit risk: real estate and leveraged lending – BIS
• Beyond China: Here Are the Next Real Estate Markets to Drop – Barron’s
• Where Should Affluent People Live? it’s not a simple question – Freddie deBoer

On the US:    

• Zillow Sees Slowing Demand for Ads in Housing Downturn. Shares fall after earnings forecast misses analyst estimates. Piper Sandler’s Champion says it’s ‘rough’ in real estate now – Bloomberg
• Zillow economists: Here’s the home price shift coming for your local housing market in 2023 – Fortune  
• Soaring rent prices have advocates calling on White House to intervene. A coalition of tenant unions, community organizations and legal groups is calling on the Biden administration to launch a full government response to lower rent inflation. – Washington Post
• How big is the housing shortage? – Market Urbanism
• The Snowballing US Rental Crisis Is Sparing Nowhere and No One. Renters across cities and income brackets are struggling to find new homes or pay for the ones they already live in. – Bloomberg
• Housing Affordability Falls to Lowest Level Since Great Recession – NAHB
• Lumber Futures Hit Two-Week High as Canada Cuts Wood Output. West Fraser shutters 2.5% of its North America capacity. Lumber prices may have reached bottom for now, analyst says – Bloomberg 
• Housing Solutions Matchmaker Tool – National Association of Counties
• A Quick Note on the GNM – GSE Early Delinquency Gap – Recursion
• Current State of the Housing Market – Calculated Risk
• Mortgage Rates Swing Back Up, Hitting 5.22% in Volatile Market. Housing market is becoming more balanced, Freddie Mac says. Mortgage rates increase for first time in three weeks – Bloomberg  

On China:

• China’s mortgage boycotts are a symptom of a broader crisis. The real threat to developers is falling sales – The Economist
• China Property Woes Spark Longest Mortgage Debt Halt Since 2015. Sales of residential mortgage-backed notes set for record drop. Plummeting home sales, developers’ cash crunch weaken demand – Bloomberg
• China property crisis: Why homeowners stopped paying their mortgages – BBC

On other countries:  

• [Australia] Why soaring rates are not scaring off property investors. Rising rents and record-low vacancy rates are attracting buyers seeking higher yields and long-term capital growth. – Financial Review
• [India] India’s Top Mortgage Lender Signs ‘World’s Biggest’ Social Loan. HDFC completes $1.1 billion loan to finance affordable housing. HDFC prices social loan at margin of 90 basis points over SOFR – Bloomberg
• [India] Insecure property rights and the housing market: Explaining India’s housing vacancy paradox – Journal of Urban Economics
• [New Zealand] New Zealand House Prices Fall for First Time in 11 Years – Bloomberg
• [Sweden] Stockholm Apartment Prices Fall Most Since Pre-Covid Era – Bloomberg
• [United Kingdom] UK House Prices Fall for First Time in a Year as Crisis Bites. Buyers feeling the effects of inflation, higher mortgage costs. Strain set to worsen as BOE steps up fight on rising prices – Bloomberg
• [United Kingdom] Mortgage misery for millions following rate rise. 40% of fixed-rate deals will end this year, exposing borrowers to higher costs – FT
• [United Kingdom] London tenants facing ‘increasingly unaffordable’ rents. Shortage of accommodation results in private landlords and agents demanding that applicants bid to secure property – FT
• [United Kingdom] Mortgage wake-up call for middle classes. Rising interest rates could cost some borrowers more than rising energy bills – FT
• [United Kingdom] UK Residential Market Survey – RICS

From Market Urbanism:

“Two teams of researchers recently released estimates of the U.S. housing shortage – and they differ by a factor of five. Is the national shortage 20 million homes or just 4 million? With a range that big, both published by pro-housing groups, you’d be forgiven for thinking this is an exercise in futility.

But look under the hood and each estimate is asking and answering a different question. Together they offer a useful parallax on the current cost crisis. To oversimplify, here’s how I’m thinking about the studies:

• America needs to find space for about 4 million more households.
• City housing deficits add up to about 20 million dwellings, but the total is less than the sum of the parts.
• If we deregulated everywhere, high-priced places would build much more housing than Up For Growth predicts. And moderate-priced places would build much less housing than the JEC predicts.

JEC: 20 million

The easier report to understand is that produced at the Joint Economic Committee by the classically-named duo Kevin Corinth and Hugo Dante, the latter a GMU/Mercatus alumnus. They use a straightforward supply and demand framework with some simple, defensible assumptions about the housing production function and the demand curve within each county.”

Continue reading here.

From Josh Barro:

“It’s a pretty good week for my conversation with Adam Ozimek, an economist whose recent work focuses on the intersection between labor markets and housing.

Adam is an evangelist for remote work — perhaps in part because he lives near Lancaster, Pennsylvania, the sort of affordable mid-size city within a couple of hours of very major cities that stands to gain residents from the remote work trend — but he also has arguments that the sharp increase in partial or fully remote work is simply very important for the ways it will change how many parts of the economy operate. Here’s what Adam said:

“I think remote work really is a general purpose technology… It’s more comparable to electrification. It’s more comparable to the invention of the internal combustion engine or automobiles or something like that in the way that it’s going to ripple through everything and it’s going to have these longstanding big impacts. I’m not saying the aggregate economic impact is going to be bigger than or as big as electrification, but it’s that kind of fundamental change.”

There are few places where this effect is bigger than in housing: remote workers want larger homes, they don’t need to live so close to their offices, and they have more flexibility to choose the sort of community they live in. That’s driving all sorts of shifts in relative home prices and changing what needs to be built and where.

I think you’ll find our conversation very interesting. You can find a transcript of the episode and other relevant links at the end of this newsletter.”

Here are some links related to the podcast conversation with Adam:

Click here for a transcript of this episode.

Adam cited this paper by economists Jonathan Dingel and Brett Neiman that says 37% of jobs in America could be done entirely remotely. Here’s a helpful Reuters feature on their work.

Adam also cited economist Nick Bloom’s analysis of worker preference for remote, hybrid, and full-time in-person work.

I referenced this data from key-card company Kastle about the fraction of employees badging in to the office across different metropolitan areas, and this piece from Matt Yglesias on Chicago’s specific troubles.

Conferences

• SI 2022 Real Estate – NBER
• SI 2022 Urban Economics – NBER

On cross-country:

• Eurozone mortgage rate rises threaten house price growth. Borrowing expected to become more expensive in coming months as European Central Bank increases rates – FT
• The global housing boom is running out of steam. Where are prices going to fall most sharply? – The Economist
• Housing Boom and Headline Inflation: Insights from Machine Learning – IMF
• Era of soaring house prices is ending as central banks raise rates. Policies are tightening when major economies are either falling into recession or heading that way – The Guardian
• Will Increasing Housing Supply Reduce Urban Inequality? – International Regional Science Review
• Adapting to flood risk: Evidence from global cities – VoxEU

On the US:    

• The Understated ‘Housing Shortage’ in the United States – Institute of Labor Economics
• The Upside-Down Housing Market. What Happens After Mortgage Rates Hit A 13-Year High? – Apricitas Economics
• Home Sellers Cut Prices as Housing Market Cools. How higher mortgage rates—and frustration—are changing the playbook for sellers – Wall Street Journal
• Why Rising Mortgage Rates Don’t Mean Falling Home Prices – Barron’s
• Should DC’s Empty Office Buildings Get Turned Into Apartments? It’s clear workers will never return in full force. Developers and local officials see an opportunity. – Washingtonian
• A College Town Takes On Exclusionary Zoning. Gainesville, Florida, could be on the verge of eliminating single-family housing requirements. – Bloomberg
• Median vs Repeat Sales Index House Prices – Calculated Risk
• What Is the Future of Public Housing in America’s Cities? – AEI 
• Apartment Rents Begin Tapering Off After Record Growth. Rents are still rising at a historically fast pace but market shows signs of softening – Wall Street Journal
• What’s Ahead for the Housing Market – Goldman Sachs
• Buyers’ Expectations of Housing Availability Improve – NAHB
• A Town’s Housing Crisis Exposes a ‘House of Cards’. In the Idaho resort area of Sun Valley, there are so few housing options that many workers are resorting to garages, campers and tents. – New York Times
• Private Residential Spending Declines in June – NAHB
• The Mix of Home Buyers Is Changing, Leading to Improved Affordability – NAHB
• The Cross-Section of Housing Returns – Cleveland Fed
• New housing market data reveals a stunning shift as these 21 of the top 50 metro areas show price declines for June – AEI
• Banks Report Unchanged Home Lending Standards – NAHB

On China:

• ‘Financial monsters’: China’s bad banks complicate property crisis. Distressed asset management companies highlight the challenge Beijing faces in mobilising rescue options – FT
• Sweeping Mortgage Boycott Changes the Face of Dissent in China. Angry homebuyers have launched one of the most effective protests the country has ever seen. – Bloomberg
• China Home Sales Plunge in July, as Mortgage Revolt Deters Buyers. Sales fell on the year and from the previous month, ending a budding recovery – Wall Street Journal
• China’s Home Sales Slump Further During Mortgage Boycotts. Top 100 developers saw sales tumble almost 40% in July. Industry confidence remains at a low level, CRIC says – Bloomberg
• China Banks May Face $350 Billion in Losses From Property Crisis. Mortgage boycotts and slowing growth are rattling authorities. Pressure seen growing on China’s $56 trillion banking system – Bloomberg  
• How China can overcome its property crisis – OMFIF
• Chinese banks can withstand mortgage boycott if property prices hold – S&P Global

On other countries:  

• [Australia] From boom to gloom, Australia’s red hot property market hits reverse – Reuters
• [Australia] Will the house price collapse be different this time? A puzzling feature of the latest house price slump is that prices for top-end properties, which are usually most vulnerable to housing market corrections, are showing surprising resilience. – Financial Review
• [Austria] Austria Real Estate Market Analysis 2022 – Global Property Guide
• [Hong Kong] ‘Historic’ Hong Kong home prices: worst yet to come, with up to 30 per cent slump a possibility as market enters decline. – South China Morning Post
• [Hong Kong] Will sharp rises in interest rates diminish Hong Kong’s love affair with property? – South China Morning Post
• [New Zealand] New Zealand House Prices Sink Most Since Global Financial Crisis. CoreLogic data show biggest three-month decline since 2008. Buyer demand curbed by soaring mortgage interest rates – Bloomberg
• [Poland] Poland’s mortgage holiday for households threatens bank profits. Lenders warn moratorium will hit earnings and could result in legal action against government – FT
• [South Korea] S. Korea’s home prices to fall up to 2.8% with 100 bp rate hike – c.bank report – Reuters
• [United Kingdom] UK’s Mortgage Market Feels the Heat From Rising Rates. NatWest reports slower mortgage growth in second quarter. Lloyds predicts house prices will finally fall in coming year – Bloomberg
• [United Kingdom] The Guardian view on housing costs: a grave and growing injustice. Levelling up will be impossible as long as rents and house prices are allowed to keep on climbing – The Guardian
• [United Kingdom] Interest rates are rising – so why are mortgage rules being scrapped? Analysis: Bank ruling that borrowers don’t have to show they can afford steep repayment hikes raises questions over how to curb excessive borrowing – The Guardian
• [United Kingdom] Who took out mortgage payment holidays during the pandemic? – Bank of England
• [United Kingdom] UK house prices rise at 11% annual rate despite cost of living crisis. Strong labour market and limited housing stock push up prices as mortgage transactions cool – FT

From RICS:

” – Construction Activity Index stalls in Europe and APAC, but remains a little more resilient elsewhere
– Overwhelming majority of respondents still report material costs and shortages to be impediments
– Global workloads still anticipated to rise across all sectors, albeit expectations are being scaled back”