The Unassuming Economist

From a book chapter by Hites Ahir and Prakash Loungani:

“In April 2008, the IMF’s flagship publication World Economic Outlook provided estimates of overvaluation in house prices for a group of advanced economies. Though house prices had fallen in the United States in the preceding years, they had continued to rise in many other countries. The IMF’s analysis suggested that, with only a few exceptions, house prices were overvalued by between 10% and 30%, as shown by the bars in Fig. 7.1. The dots show the decline in house prices that occurred over the subsequent 4 years. In many countries where the IMF had assessed house prices to be overvalued, house prices did indeed fall quite significantly—these cases include Denmark, Ireland, the Netherlands and the United Kingdom.

Fast forward to the present: The IMF’s Global House Price Index—a simple average of real house prices for 57 countries—is now back to its level before the global financial crisis (GFC). The index has been inching up since 2012, making the duration of the run-up comparable to one in 2001–06 that ended in house price collapses in many countries. Is it time to worry again about overvaluation?

This chapter describes the evolution of IMF monitoring—“surveillance” in the IMF’s jargon—of housing markets from 2008 to the present. Section 2 describes how the IMF has assessed overvaluation in housing markets and the advice it offered on the policy tools needed to manage house price booms. It lays out the IMF’s ‘corporate view’ or ‘house view’ that macroprudential policies must be the first line of defense to deal with house price booms. Section 3 takes up the issue of whether the run-up in house prices over the past few years should be a source of worry. Section 4 describes how IMF surveillance has adapted as housing markets have become more ‘glocalized’ and developments at the sub-national level gain greater prominence.1 Section 5 has some concluding observations.”

Continue reading here.

On cross-country:

• How Property Taxes Can Help Low-Income Countries to Develop. Satellites, drones, and the right policies can help countries increase revenue by up to 10 times at the local level – IMF

Working papers and conferences:

• Home Purchase Appraisals in Minority Neighborhoods – FHFA
• Expecting Climate Change: A Nationwide Field Experiment in the Housing Market – NBER
• Quantitative Urban Economics – NBER
• Spatial Economics – NBER
• The Rise in Mortgage Fees: Evidence from HMDA Data – Philadelphia Fed
• Disentangling the Drivers of Exuberant House Prices – SSRN
• Institutional Investors In The Market For Single-Family Housing: Where Did They Come From, Where Did They Go? – SSRN

On the US—developments on house prices, rent, permits and mortgage:    

• New England has a housing shortage. Could ‘ADUs’ help? Boston Fed event explores ‘accessory dwelling units’ as part of housing solution – Boston Fed
• If the Fed Is Cutting Rates, Why Are Mortgage Rates Rising? The latest rise, to 6.79% for a 30-year mortgage, reflects bond market concern about President-elect Trump’s agenda. It extends an uptick in mortgage rates despite expected Federal Reserve rate cuts. – New York Times
• If the Fed Is Cutting Rates, Why Aren’t Mortgage Rates Falling? Consumer borrowing costs haven’t tracked the Fed since it cut rates by half a percentage point in September – Wall Street Journal
• Consumers Feeling Better About Housing Market Despite High Home Prices. HPSI Up Significantly from All-Time Low Recorded Two Years Ago – Fannie Mae
• Here’s Where Minimum-Wage Workers Can Actually Afford Rent. A study found that people who earn low wages were rent-burdened in all of the country’s 50 largest real estate markets. – New York Times
• Trump’s a Developer, But Don’t Expect Him to Solve the Housing Crisis. The incoming president’s messaging on housing has been muddled by his support for tariffs and deportations, which would make it costlier to build. – Bloomberg
• U.S. Residential Building Permits by Market Size: 2023 – New Geography
• Mortgage Rates Fell, Then Rose. What Comes Next? Many would-be home buyers are still hoping for mortgage rates to come down as the Federal Reserve cuts interest rates. How much they will fall is unclear. – New York Times
• 2nd Look at Local Housing Markets in October. First Year-over-year Sales Gain Since August 2021 – Calculated Risk
• Housing Costs Continue to Drive Inflation – NAHB
• NY Fed: Mortgage Originations by Credit Score, Delinquencies Increase, Foreclosures Remain Low – Calculated Risk 
• Part 1: Current State of the Housing Market; Overview for mid-November 2024 – Calculated Risk

On the US—other developments:    

• Moving to the Country: Unpacking the Persistent Increase in Rural Housing Demand Since the Pandemic – Fannie Mae
• Weekly Housing Market Update: Election Puts Housing Supply and Affordability on the Radar – Realtor.com
• Americans Staged a Property Tax Revolt on Election Day. Florida, Georgia among the states that voted for certain limits on property taxes, while North Dakota rejected complete ban – Wall Street Journal
• What Makes Omaha Different From Other Million-Dollar Housing Markets. Home to billionaire investor Warren Buffett, the Nebraska city remains relatively affordable compared with other luxury real-estate markets – Wall Street Journal
• How Zoning Regulations Affect Affordable Housing – NAHB
• Housing has become less affordable across all US metros. – Oxford Economics
• Washington has a housing crisis. The Feds need a creative solution. The key is underused pre-World War II office space, which is well suited for conversion to apartments. – Washington Post
• Why ‘Affordable Housing’ in New York City Can Still Cost $3,500 a Month. Soaring rents and few options have made it hard for average people to live in the city. Even “affordable” units often cost too much. – New York Times  
• In Greater Minnesota, apartment owners’ operating costs rise as small cities “scream for more housing”. Rental housing owners, managers, and developers describe both new and long-standing challenges in Minnesota’s smaller markets – Minneapolis Fed
• Consumers’ Perspectives on Housing Density and Zoning – Fannie Mae  
• The Election’s Sleeper Issue. The impact of costly—and scarce—housing on election results may be underappreciated. – Barron’s
• How higher property taxes increase home affordability. Economists find raising property taxes can boost homeownership for young families – Minneapolis Fed
• Most Consumers Support Building New Housing but Disagree on the Details in Their Own Neighborhoods – Fannie Mae
• Building Material Prices Increase While Other Input Prices Fall – NAHB
• New York Doesn’t Have Enough Housing. Why Is It So Expensive to Build? The scarcity of apartments makes it easy for landlords to raise rents, but building new developments comes with high costs and regulatory hurdles. – New York Times      

On China:

• Is Trump election good or bad for Chinese property investors in the US? It’s a mixed bag. Trump tax cuts, tariffs will keep interest rates high, but current owners will benefit from his presidency – South China Morning Post
• Has China’s property market reached the bottom? – Goldman Sachs
• China Cuts Taxes for Home Purchases in Fiscal Policy Support. Home purchase deed tax is reduced to as low as 1% for buyers. Move signals more fiscal support for the sluggish economy – Bloomberg

On Australia and New Zealand:

• [Australia] The type of property where prices are falling most right now – The Sydney Morning Herald
• [Australia] ‘It’s never going to happen’: three in five Australian renters expect to never own a home as steep rents hit. Nation of homeowners is about ‘to flip’ to having more people renting, which presents policy challenges, researchers say – The Guardian
• [Australia] Voters furious at housing impasse, O’Neil warns Greens – Financial Review
• [Australia] Want to slash social housing waitlists? We should allow tenants to swap homes – The Conversation
• [New Zealand] New Zealand house prices rise in October as rate cuts boost confidence – Reuters

On other countries:  

• [Hong Kong] Hong Kong home prices to bottom out in short term after rate cut, analysts say. Unexpected prime-rate cut by local lenders seen bringing more buyers into market, shoring up prices – South China Morning Post
• [Hong Kong] Why didn’t Hong Kong set stricter rules to wipe out its notorious shoebox flats? Setting a larger minimum size for subdivided flats would have meant delays in supplying homes to those affected, minister says – South China Morning Post
• [Hong Kong] Hong Kong Residential Property In 2025: Volume Will Rise, Not Price – S&P Global
• [Hong Kong] Hong Kong residential property prices to rebound next year, though unsold inventory looms. ‘We expect Hong Kong home prices to be up 5 per cent in 2025,’ says Praveen Choudhary of Morgan Stanley – South China Morning Post 
• [Hong Kong] Hong Kong’s Tycoons Are Selling Trophy Homes at Fire Sale Prices. China’s economic downturn has not been kind to the ultrarich who made their wealth on its rise. In their haste to cough up cash, Hong Kong’s luxury property market has had some fire sales. – New York Times
• [Ireland] Building small terraced homes could reduce construction costs, boost supply and lower prices for first-time buyers. Small terraced houses would be more affordable for one- and two-person households, but builders prefer to construct apartments or semi-detached homes because of higher profit margins – The Irish Times
• [Israel] Jerusalem planners laud anticipated skyscrapers, but wary locals cite towering concerns. While the municipality claims that constructing 500 tall buildings will give the Holy City a vertical facelift, residents say it will mar the landscape and only benefit developers – The Times of Israel
• [Saudi Arabia] Saudi Residential Real Estate: The Market Is Booming – S&P Global
• [United Kingdom] Does the Bank of England’s interest rate cut mean lower mortgages? What the decision means for homeowners – and the implications for savings, loans and credit cards – The Guardian
• [United Kingdom] UK house prices hit record high in October, says Halifax. Typical property now costs £293,999, surpassing previous peak set in June 2022 – FT
• [United Kingdom] UK home sales still below pre-pandemic levels. Pricier mortgages in recent years have a knock-on effect on property transactions – FT
• [United Kingdom] UK renters hit by housing supply squeeze. Number of new properties coming to market is weakest since 2021, driving rent rises, Rics survey finds – FT

On cross-country:

• A long-term view of house prices – World Economic Forum
• The European housing shortage is fueling populism’s ascent. Housing markets in Europe’s magnet cities are buckling as demand outpaces supply. – Washington Post

Working papers and conferences:

• Quantifying ‘Mortgage Rate Lock’ for US Homeowners – NBER
• The role of cities in economic development – VoxDev
• The Sensitivity of Bank Performance to Local Housing Prices – Evidence from Diversified and Local Banks – SSRN

On the US—developments on house prices, rent, permits and mortgage:    

• Buying like it’s 2021: Nearly half of recent buyers have a mortgage rate below 5% – Zillow
• Who Paid More in Rent: Gen Z or Millennials? An analysis of Census Bureau data found that while Generation Z is definitely rent burdened, millennials may have had it worse. – New York Times
• Home Builders Usually Love Cheap Mortgages—Maybe Not This Time. Sales of newly built homes have been on a tear. Soon, builders will face stiffer competition for buyers. – Wall Street Journal
• 10 Things to Know About the Mortgage and Housing Markets Right Now – October 2024 – CoreLogic
• Squeezed Homebuilders Are Bad News for the Housing Market. A pullback in construction activity is the last thing we need. – Bloomberg 
• The surprising barrier that keeps us from building the housing we need. Sure, there’s too much red tape, but there is another reason building anything is so expensive: the construction industry’s “awful” productivity. – MIT
• Inflation Adjusted House Prices 1.5% Below 2022 Peak. Price-to-rent index is 8.1% below 2022 peak – Calculated Risk
• Surging Mortgage Rates Threaten US Housing Market Momentum. Buyers have been whipsawed by borrowing costs in recent weeks. Volatility threatens to weigh on demand from house hunters – Bloomberg 
• Private Residential Construction Spending Rises in September – NAHB
• ICE Mortgage Monitor: “Annual home price growth cooled for the seventh consecutive month” – Calculated Risk
• Residential Building Wages Grow at Unprecedented Rate – NAHB
• October 2024 Monthly Housing Market Trends Report – Realtor.com
• America’s Empty Apartments Are Finally Starting to Fill Up. If that demand is sustained, landlords likely will have more pricing power starting sometime next year – Wall Street Journal
• Swing States’ Home Values Outweigh 2024 Election Uncertainty – CoreLogic  
• Deregulation, Not Rent Control, Is the Right Response to the Housing Crisis – Cato
• In Q2, almost 20% of Units Started Built-for-Rent were Single Family. Quarterly Housing Starts and Completions by Purpose and Design – Calculated Risk
• US Home Price Insights – November 2024 – CoreLogic
• Mortgage Activity Declines in October as Mortgage Rates Increase – NAHB
• Multifamily Developer Sentiment Showed Mixed Results in Third Quarter – NAHB
• 1st Look at Local Housing Markets in October. First Year-over-year Sales Gain Since August 2021 – Calculated Risk

On the US—other developments:    

• Donald Trump Will Return to the White House: What His Presidency Means for the Housing Market – Realtor.com
• The Housing Election That Won’t Fix the Housing Crisis. Victory in the fight for cheaper housing, a more liberal land-use regime, and greater property rights won’t come from the White House. – Reason
• How Harris and Trump Want to Solve the Housing Crisis. The U.S. is in an affordable housing crisis and the solution seems simple: build more houses. WSJ takes a look at the process of building a home, where it gets expensive and where Kamala Harris’s and Donald Trump’s housing plans would intervene. Photo: Madeline Marshall – Wall Street Journal
• Can a National Housing Policy Solve the Affordability Crisis in Cities? – Harvard
• Government Policies Are Making it More Expensive to Turn Land Into Homes – Bloomberg
• A Letter to the Nation’s New Leaders: Right Now, the American Dream of Homeownership Is in Crisis – Realtor.com
• The Silly Rule That’s Helping Keep Housing Costs High – New York Times
• The 5 Housing Markets To Watch in 2025—Especially If You’re an Investor – Realtor.com  
• Zillow Is Caught in a Housing Slowdown. It Still Beat Earnings Estimates. – Barron’s

On China:

• Home Prices Declining in China – Apollo
• China’s Residential Property Market Analysis 2024 – Global Property Guide
• Six cities, one question: is China’s property market turning a corner? From Shanghai to Guangzhou and Beijing to Foshan, buyers and agents voice concerns ahead of next phase of stimulus – FT

On Australia and New Zealand:

• [Australia] Australian home prices hit new high during spring rush but Sydney records small slip. Perth, Adelaide and Brisbane remain the strongest capital city property markets, with prices up 20.58%, 14.91% and 12.51% over the past year – The Guardian
• [Australia] Sydney House Prices Drop for the First Time in Almost Two Years – Bloomberg
• [Australia] Australian House Prices Rise 0.3% in October. Prices post their 21st monthly rise in succession in October, reflecting weak supply of homes and surging immigration – Wall Street Journal
• [Australia] FET #45: Why the Aussie construction sector is defying predictions with Rob Sobyra – Fresh Economic Thinking
• [Australia] Building more houses will build a better society – Grattan Institute
• [New Zealand] New Zealand Housing Market Bogged Down by Flood of Listings. Prices seen recovering in 2025 if summer sales clear backlog. ‘Prices may bounce along the bottom for a few months yet’: ANZ – Bloomberg

On other countries:  

• [Canada] Toronto Home Sales Climb 14% in October, Boosted by Rate Cuts. Benchmark measure of prices rose for the first time since July. Lower borrowing costs are helping affordability, Pearce says – Bloomberg
• [Canada] Finding balance in the mortgage market – Bank of Canada
• [Canada] Canada’s mortgage market—A question of balance – Bank of Canada
• [Canada] Mortgage stress tests and household financial resilience under monetary policy tightening – Bank of Canada
• [Canada] Bank of Canada Warns of ‘Tinkering’ With Mortgage Rules – Bloomberg
• [Hong Kong] Hong Kong’s Buy-Rent Gap Set to Narrow as Home Prices Bottom Out. Prices are at an eight-year low with rents near a record high. Markets are unlikely to fully converge as oversupply persists – Bloomberg
• [Norway] Norway Housing Prices Extend Gains, Backing Central Bank’s View – Bloomberg
• [Sweden] Swedish Housing Prices Hold Up Better Than Usual in October – Bloomberg
• [Sweden] Swedish Report Backs Government Push to Loosen Mortgage Rules – Bloomberg
• [United Kingdom] UK Housebuilding Recovery Stalled Before Budget, PMI Shows – Bloomberg

From a paper by François de Soyres, Simon Fuchs, Illenin O. Kondo, and Helene Maghin:

“We show how local worker flow adjustment margins yield a theory-consistent sufficient statistic
approximating the welfare effects of local shocks. Furthermore, we isolate a city’s insurance value
as this approximation’s second-order term. Leveraging rich labor flows data across occupations,
industries, and cities in France, we estimate spatial and non-spatial flows responses to local labor
demand shocks. Less economically diverse French cities experience deeper contractions in gross
outflows following negative shocks. In contrast, more economic concentration begets a modestly
larger increase in gross worker flows following positive shocks. Altogether, we uncover a sizable
welfare insurance gains from local economic diversity.”

Working papers and conferences:

• The Distaste for Housing Density – NBER
• The Determinants of Local Housing Supply in England – CEPR

On the US—developments on house prices, rent, permits and mortgage:    

• What can the next administration do about the US housing shortage? – Brookings
• Scariest Charts of the Week – Real Estate Decoded
• All-Cash Sales and Prices Decline in the Third Quarter – NAHB
• This Year’s Housing Turnaround Ended Before It Started. Sales of existing homes are on track for the worst two-year period since the mid-1990s – Wall Street Journal
• Owner-Occupied Single-Family Housing Units Across Congressional Districts – NAHB
• Pending Home Sales in US See Biggest Gain Since Summer 2020. Index of sales remains low despite outsize September rise. All US regions report increases, led by jump in western states – Bloomberg
• Housing market faces 7% mortgage rates again—here’s what is really going on. The Fed lowered interest rates, so why are the mortgage rates for the housing market climbing back up again? – Fast Company 
• Freddie Mac House Price Index Increased in September; Up 3.6% Year-over-year. 17 of the 30 worst performing cities are now in Florida! – Calculated Risk

On the US—other developments:    

• Why a Key Biden Effort to Boost Affordable Housing Has Faced Hurdles. The Biden administration rolled out a plan last year to create more housing by unlocking more than $35 billion in lending capacity. It has yet to close on any loans that would support housing-related projects. – New York Times
• What Harris and Trump plan to do about housing costs. Housing affordability has become a key issue for both the Trump and Harris campaigns. Today on “Post Reports,” what each candidate is proposing to do about the housing crisis, and whether their solutions could actually work. – Washington Post
• Can Public Housing Play a Role in a New American Social Housing System? – Harvard Joint Center for Housing Studies
• Boosting Housing Affordability: Practical Suggestions for Congress and the White House. How executive actions and new laws in Washington can help reform efforts in the states. – Mercatus Center
• To Fix the Affordable Housing Shortage, Policymakers Should Support Smarter Housing Policies Instead of Using Immigration to Evade Responsibility. Avoiding the real issues causing higher housing costs distracts from constructive solutions to solve America’s housing shortage. – Center for American Progress
• Where do Trump and Harris stand on housing, taxes and other policies? Polls show US voters unhappy about the economy, their top election concern. How would the presidential candidates address economic issues such as cost of living and labor? – The Guardian
• A Proposal to Address the Housing Crisis – Calculated Risk
• Fewer US Homes Are Insured Against Floods, Even as Risks Are Rising – Econofact
• U.S. housing market is on the ‘verge of a vicious cycle,’ which is ‘not good for America,’ Lennar Mortgage head warns. Politicians should ‘stop talking about affordability — and start delivering on affordability,’ Laura Escobar says – Market Watch
• The Role of the Recent Immigrant Surge in Housing Costs – Harvard Joint Center for Housing Studies
• Hedge funds and housing – Politico
• Climate Change Should Make You Rethink Homeownership – New York Times
• Construction Job Openings Fall in September – NAHB
• Weaker Homeownership Data for Younger Households – NAHB
• A Wall Street Landlord Bought Your Neighbor’s House. It’s a Mixed Blessing. The zip codes where investors own a bigger share of homes have seen higher-than-average increases in both prices and rents – Wall Street Journal
• The Year’s Most Important Housing Vote. Proposition 33 would repeal all of California’s state-level limits on rent control. It’s passage could prove to be a disaster for housing supply in the Golden State. – Reason
• Fannie and Freddie: Single Family and Multi-Family Serious Delinquency Rates Increased in September. Fannie Mae Multi-Family Delinquency Rate Ties Highest Since 2011 – Calculated Risk
• Radical Plans for Public Housing Stir Up Hope, and Doubt. A plan would demolish aged housing projects in Chelsea and build new homes and thousands of additional apartments. It could be a game changer. – New York Times
• N.Y.C. Housing Voucher Program Is ‘Plagued With Problems,’ Audit Says. Thomas DiNapoli, the New York State comptroller, found that management lapses had caused delays for people who needed permanent housing. – New York Times
• Nightmare on Main Street: Unpacking 10 Scary Housing Trends – CoreLogic
• Zombie Foreclosures Remain Sparce Around U.S. in Fourth Quarter Amid Ongoing Strong Housing Market – ATTOM 

On Australia and New Zealand

• [Australia] Housing market on the cusp of another boom – Financial Review
• [Australia] Housing policy heats up – Grattan Institute
• [Australia] Sydney House Prices Drop for the First Time in Almost Two Years – Bloomberg
• [New Zealand] New Zealand Housing Market Bogged Down by Flood of Listings. Prices seen recovering in 2025 if summer sales clear backlog. ‘Prices may bounce along the bottom for a few months yet’: ANZ – Bloomberg

On other countries:  

• [Canada] Canada faces worsening home ownership crisis with stalled condo sales – Reuters
• [Hong Kong] Hong Kong’s Rising Home Sales Still Face Economic Headwinds – Bloomberg
• [Ireland] Economic policy issues in the Irish housing market – IDEAS
• [Singapore] Singapore Home Prices Fall Less Than Expected; Rents Rebound – Bloomberg
• [United Kingdom] Chancellor pledges extra £500m for social homes in budget. Treasury plans £5bn total investment in housing supply and reduction in discounts under right-to-buy scheme – The Guardian