The Unassuming Economist

From Housing Wire:

“Frank Nothaft, chief economist at CoreLogic and before that, the top economist at Freddie Mac, has died. He was 66.

At CoreLogic, Nothaft headed the office of the economist, providing analysis, commentary and forecasting trends in global real estate, insurance and mortgage markets. Prior to joining CoreLogic in 2015, Nothaft had a nearly 30-year career at Freddie Mac, where he was most recently the chief economist.

“When I arrived at Freddie Mac in 2012 he was a long-established major name in mortgage research,” said Donald Layton, who was CEO of Freddie Mac from 2012 to 2018. “It was always a pleasure to work with him because he was truly a nice individual.”

Before joining Freddie Mac, Nothaft was an economist with the Board of Governors of the Federal Reserve System, where he served in the mortgage and consumer finance section and assisted Gov. Henry Wallich.

During his career, Nothaft often was called upon to provide expert commentary on national television and at industry trade conferences, explaining the workings of the housing market for both industry-focused and general audiences.

“Most people knew Frank as one of the nation’s premier housing economists,” said Robin Wachner, a CoreLogic spokesperson. “He was also an outstanding leader and one of those extraordinary people who was loved and admired by everyone who was lucky enough to know him.”

From 2010 to 2015, he was on the faculty at Georgetown University School of Continuing Studies, where he taught urban real estate economics. He was a past president of the American Real Estate and Urban Economics Association and served on the board of directors of the Financial Management Association.

Nothaft was well-liked by fellow economists studying the housing market, as well as his colleagues, who described him as straightforward and prizing accuracy. But he was also known for his quirky sense of style.”

From the James A. Schmitz at the Minneapolis Fed:

“U.S. government concerns about great disparities in housing conditions are at least 100 years old. For the first 50 years of this period, U.S. housing crises were widely considered to stem from the failure of the construction industry to adopt new technology — in particular, factory production methods. The introduction of these methods in many industries had already greatly narrowed the quality of goods consumed by low- and high-income Americans. It was widely known why the industry failed to adopt these methods: Monopolies in traditional construction blocked and sabotaged them. Very little has changed in the last 50 years. The industry still fails to adopt factory methods, with monopolies, like HUD and NAHB, blocking attempts to adopt them. As a result, the productivity record of the construction industry has been horrendous. One thing has changed. Today there is very little discussion of factory-built housing; of the very few that recognize the industry’s failure to adopt factory methods, there is no realization that monopolies are blocking the methods. That these monopolies, in particular, HUD and NAHB, can cause so much hardship in our country, and through misinformation and deceit cover it up, seems almost beyond belief. But, unfortunately, it’s a history that is not uncommon. There are many other industries where monopolies have inflicted great harm on Americans, like the tobacco industry, yet through misinformation and deceit cover up the great harm.”

From the IMF’s latest report on Luxembourg:

“With residential real estate prices more than doubling in a decade and (60 percent in the last 4 years),
housing is becoming a key challenge in Luxembourg. Although 2/3rd of households are homeowners,
affordability concerns have been on the rise, including for the middle-income. If continued, these
trends could hamper the country’s competitiveness and attractiveness for workers and pose risks for
financial stability in the medium term. Building on previous IMF analytical work, and looking at the
drivers of the recent housing trends as well as the government’s policies, the paper advocates for a
comprehensive strategy to reduce imbalances in the housing market. The approach includes measures
to: i) boost housing supply (e.g., by mobilizing vacant dwellings and unused land, using existing
resources more efficiently by building more, denser, faster, and at a lower cost), while increasing the
share of affordable homes, ii) contain demand pressure and reduce its geographic concentration,
iii) increase residential mobility, and iv) reduce under occupation. The paper also emphasizes the need
for a more effective and coordinated implementation of reforms.”

On cross-country:

• Will global property prices continue to remain frothy? – BFM
• Financial stability amid Russia’s war in Ukraine – European Central Bank
• Impact of final Basel III on the EU mortgage sector – Copenhagen Economics
• New Housing Supply: Empirical and Theoretical Studies – SSRN

On the US:    

• US For-Sale Homes Rise in First Since 2019, Realtor.com Shows – Bloomberg
•  U.S. house price inflation to cool as buyers sidelined by higher rates: Reuters poll – Reuters
• Lumber Is the Cheapest in Seven Months as Housing Markets Soften. Futures may sink to as low as $400 per 1,000 board feet, says analyst – Bloomberg
• A recession could throw cold water on the housing market — but that doesn’t mean it’s going to get any easier to buy a home – Business Insider
• Moving From Opportunity: The High Cost of Restrictions on Land Use – Marginal Revolution
• Big U.S. Cities Lost More Residents as Covid-19 Pandemic Stretched On. San Francisco and Chicago population totals are near 2010 levels – Wall Street Journal
• Fed Fears Hit Mortgage Bonds, Attracting Investors. Mortgage REIT Annaly Capital has raised about $3 billion in recent weeks to buy into the battered mortgage-bond market – Wall Street Journal
• County Where It Took 50 Years To Approve New Subdivision Bans New Airbnbs. Officials in Marin County, California, argue a temporary moratorium on new short-term rentals in western portions of the county is necessary to preserve the area’s limited housing stock. – Reason
• Homeownership Remains the American Dream, Despite Challenges. A new survey reveals that nearly three-quarters of Americans place owning a home above career, family and college as a sign of prosperity. – New York Times  
• Biden-⁠Harris Administration Launches Initiative to Modernize Building Codes, Improve Climate Resilience, and Reduce Energy Costs – White House

On other countries:  

• [Canada] Canada housing boom to halt next year on higher mortgage rates – Reuters poll – Reuters
• [Canada] Ontario needs new housing – and whatever the parties say, it won’t come easy – Globe and Mail
• [New Zealand] New Zealand house prices to sink 9.0% this year, another 2% in 2023 – Reuters
• [Saudi Arabia] Mortgage boom as Saudis queue up to buy first homes. Jump in lending and purchases reflects government push and drive to win support among youth – FT
• [Singapore] Singapore’s sovereign wealth fund swoops for £3.3bn UK student housing deal. Transaction signals confidence in UK rental market despite gloomy economic outlook – FT
• [Singapore] There’s a ‘massive gap’ between housing demand and supply in Singapore, PropertyGuru CEO says – CNBC
• [United Arab Emirates] Foreign demand to keep Dubai property prices on steady upward course: Reuters poll – Reuters
• [United Kingdom] BoE’s Cunliffe seeing evidence of slowdown in housing market – Reuters
• [United Kingdom] Mortgage reform is key to unlocking UK home ownership. The country is a global outlier in managing credit risk – FT 
• [United Kingdom] Bringing It Home: Raising Home Ownership by Reforming Mortgage Finance – Tony Blair Institute for Global Change
• [United Kingdom] UK housing market starts to slow as more sellers cut prices. Data from portal Zoopla also indicates average time to sell a home is lengthening – FT
• [United Kingdom] UK mortgage approvals slide to lowest level in two years. Analysts forecast housing market will cool in 2022 but believe large price falls are unlikely – FT
• [United Kingdom] Renters squeezed by higher housing costs and utility bills. Owner-occupiers have more elbow room to reduce their spending to cope with rising inflation, analysis suggests – FT

From Marginal Revolution:

“People are more productive in cities. As a result, people move to cities to earn higher wages but some of their productivity and wages is eaten up by land prices. How much? In a new paper Philip G. Hoxie, Daniel Shoag, and Stan Veuger show that net wages (that is wages after housing costs) used to increase in cities for all workers but since around 2000 net wages actually fall when low-wage workers move to cities. The key figure is at right.

As I wrote earlier, it used to be that poor people moved to rich places. A janitor in New York, for example, used to earn more than a janitor in Alabama even after adjusting for housing costs. As a result, janitors moved from Alabama to New York, in the process raising their standard of living and reducing income inequality. Today, however, after taking into account housing costs, janitors in New York earn less than janitors in Alabama. As a result, poor people no longer move to rich places. Indeed, there is now a slight trend for poor people to move to poor places because even though wages are lower in poor places, housing prices are lower yet.

Ideally, we want labor and other resources to move from low productivity places to high productivity places–this dynamic reallocation of resources is one of the causes of rising productivity. But for low-skill workers the opposite is happening – housing prices are driving them from high productivity places to low productivity places. Furthermore, when low-skill workers end up in low-productivity places, wages are lower so there are fewer reasons to be employed and there aren’t high-wage jobs in the area so the incentives to increase human capital are dulled. The process of poverty becomes self-reinforcing.

Why has housing become so expensive in high-productivity places? It is true that there are geographic constraints (Manhattan isn’t getting any bigger) but zoning and other land use restrictions including historical and environmental “protection” are reducing the amount of land available for housing and how much building can be done on a given piece of land. As a result, in places with lots of restrictions on land use, increased demand for housing shows up mostly in house prices rather than in house quantities.“

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