The Unassuming Economist

From the IMF’s latest report on New Zealand:

“Despite the COVID-19 pandemic, housing prices have surged in New Zealand in 2020 and much of 2021, more so than in other countries, raising affordability concerns. This was driven by demand-side factors such as record low mortgage rates, easy credit availability, COVID-related pent-up demand, and lagged effect of population growth interacting with inelastic supply. The housing market is now turning given that many of these factors are reversing, in part due to recent policy actions, but the extent of moderation remains uncertain. Rising mortgage rates are set to further dent affordability and make borrowers vulnerable to mortgage repricing risks, but financial stability risks from the housing market would likely be manageable as banks are well capitalized. Policy should focus on increasing supply and ensuring affordability, including through the provision of public social housing. Macroprudential policy should be adjusted commensurate with the evolution of the housing cycle and financial stability risks, while the planned expansion of the macroprudential toolkit may prove useful for future use.”

On cross-country:

• Which housing markets are most exposed to the coming interest-rate storm? The pain of rising mortgage repayments will be harder to bear in some places than in others – The Economist
• Wages Can’t Keep Up With Spike in Housing Prices. Across the globe, the 10 cities that experienced the largest drops in affordability in 2021 were all in the U.S., new research shows – New York Times
• Grantham: “Day of reckoning” coming for global housing markets – Macro Business
• When were U.S. home prices at their worst? – Marginal Revolution

On the US:    

• US homebuyers stretch finances to beat rising rates in hot market. Shoppers settle for less space and take second jobs in response to declining affordability – FT
• How Hurricanes Sweep Up Housing Markets: Evidence from Florida – SSRN
• The Housing Market Is Passing an Inflection Point This Spring, on the Way to More Balanced Conditions – Zillow
• For Tens of Millions of Americans, the Good Times Are Right Now. Their houses are piggy banks, their retirement accounts are up and their bosses are eager to please. When the boom ends, everything will change. – New York Times
• Long Covid in Real Estate Weighs on Core Inflation. Shelter rents are still rising and will offset falls in prices elsewhere; any uptick in headline inflation is likely to trigger another bout of market volatility. – Bloomberg
• Building Materials Prices Move Higher, Up 19% Year-over-Year – NAHB
• Multifamily Rent Growth Slow to Decelerate – Yardi Matrix  
• Fed Policy Helped Distressed Homeowners But Wasn’t a Cure-All – UCLA
• Does Affordable Housing Lead to Electoral Backlash? – Princeton University
• Mortgages drive increase in US household debt to nearly $16tn. Credit card balances stand $71bn higher than a year ago but New York Fed says borrowers are in ‘very good shape’ – FT   

On China

• Chinese property developer Sunac defaults as lockdowns hit house sales. Beijing’s pandemic restrictions have worsened a liquidity crisis in real estate – FT

On other countries:  

• [Australia] Seven downsides to Australia’s dangerous property obsession. Home ownership creates unbalanced growth and deceptive prosperity while contributing to structural problems – The Guardian
• [Australia]  Is housing our greatest policy fail? – Financial Review
• [Australia] Australia’s Housing Market Faces Its Biggest Test in 30 Years. Property prices expected to fall, building slow on rate rises. Declining home values a challenge for winner of May 21 ballot – Bloomberg
• [Belgium] The impact of changes in dwelling characteristics and housing preferences on house price indices – Central Bank of Belgium
• [Canada] Trudeau to outlaw foreign home buyers in Canada as affordability fears heat up. Housing experts say it’s not the right fix: “This is kind of scapegoating.” – Politico
• [Canada] How Do Mortgage Rate Resets Affect Consumer Spending and Debt Repayment? Evidence from Canadian Consumers – Dallas Fed
• [New Zealand] New Zealand May Eliminate Housing Shortage Within Years: Westpac – Bloomberg
• [New Zealand] As property market cools, New Zealand’s recent home buyers tighten belts – Reuters
• [Singapore] Singapore’s Hot Housing Market. Despite government’s various efforts to restrain the price of housing, costs have risen considerably since the beginning of the COVID-19 pandemic – The Diplomat
• [Spain] Mallorca, where mountains tower and house prices climb. With the easing of Covid rules, wealthy overseas buyers are back on the Balearic island, pricing out locals – FT
• [Turkey] Cheap home loans raise Turkey’s inflation roof – Reuters
• [Turkey] Turkey’s Erdogan announces measures to address soaring housing prices – Reuters 
• [Turkey] Turkey’s new measures fall short of addressing surging house prices, builders say – Reuters
• [United Kingdom] UK house prices rise but cost of living crisis will cool market, says Halifax. April marks longest run of monthly increases since 2016 as average cost of home reaches record of £286,079 – The Guardian
• [United Kingdom] Bank of England Sees U.K. House Price Growth Slowing Down – Bloomberg
• [United Kingdom] U.K. Housing Market Outlook Dims With Jump in Borrowing Costs. Fixed-rate mortgages provide a short-term cushion for buyers. End of the era of cheap money will stretch affordability – Bloomberg
• [United Kingdom] Cash buyers drive sales and prices in UK housing boom. Interest rate rises and cost of living squeeze likely to strengthen the role of mortgage-free buyers – FT
• [United Kingdom] ‘The risks are pretty big’: how long can UK house prices defy gravity? Pent-up lockdown demand and stamp duty holidays kept prices high, but rising mortgage rates and living costs may tip balance – The Guardian
• [United Kingdom] How Hongkongers became the biggest foreign homeowners in London and where they are buying – including boroughs along the Thames such as Barking and Dagenham, Tower Hamlets and Greenwich – South China Morning Post
• [United Kingdom] London’s housing market is making us buyers do irrational things. Lack of supply leads house-hunters to write heart-rending sob stories and offer outrageous amounts above the asking price – FT

From the IMF’s latest report on Peru:

On cross-country:

• Changes in the geography housing demand after the onset of COVID-19: First results from large metropolitan areas in 13 OECD countries – OECD
• EU Plans to Block Russians From Buying European Real Estate. Measure to affect Russian nationals, residents and entities. Member states must sign off on ban, which is subject to change – Bloomberg

On the US:    

• The Extraordinary Wealth Created by the Pandemic Housing Market. Rarely have so many Americans gained so much equity in so little time, but it’s also inseparable from the housing affordability crisis. – New York Times
• Joe Biden Takes Another Stab at Zoning Reform. The administration is proposing to spend $10 billion over ten years incentivizing local and state governments to remove regulatory barriers to new housing construction. – Reason
• Is Real Estate a Shelter From Inflation? Not Always. Property is typically considered a haven when prices are rising. This time, investors should be choosy about where they put their money. – Wall Street Journal
• How the pandemic has changed American homebuyers’ preferences. They are flocking to warm suburbs – The Economist
• The Fed wants to cool the U.S. housing market. Here’s what that feels like – Reuters
• Home Buyers Are Finding Ways to Take the Sting Out of Rising Mortgage Rates. More borrowers are paying upfront fees and considering adjustable-rate mortgages to lower their monthly payments – Wall Street Journal
• The Policymaking Implications of Record-High Mortgage Origination Profits During the Pandemic – Harvard Joint Center for Housing Studies
• What Does Affordable Housing Do to Nearby Property Values? A new Urban Institute study examined low-income housing in Alexandria, Virginia, to look for new answers to an age-old question. – Bloomberg
• First-Time Homebuyers are Driving the Market Forward – Freddie Mac
• A housing crash is unlikely, but a correction could be around the corner. Here’s the difference. – Business Insider
• Are soaring US property prices here to stay? Two analogous periods — 2007 and 1843 — offer big clues to what happens next – FT

On China

• Mobility restrictions and their implications on the rental housing market during the COVID-19 pandemic in China’s large cities – Cities
• Why easing policies might not revive China’s property market any time soon – Straits Times
• China Bets the House on New Houses – Council on Foreign Relations

On other countries:  

• [Australia] New policies barely lighten the load when it comes to affording a home –Sydney Morning Herald
• [Canada] Canada open to Politicians are selling us a myth on housing: that more supply will be ou salvation – Globe and Mail
• [Canada] From boom to glut: Canada’s housing plan could backfire on Trudeau – Reuters
• [New Zealand] RBNZ Says Sharp Housing Correction ‘Plausible’ as Rates Rise – Bloomberg 
• [United Kingdom] Mortgage rate rises point to slowdown in UK housing market. Higher home loan costs and the cost of living crunch are bringing caution to buyers – FT

From Apricitas Economics:

“In the years before and after the 2008 recession, American homebuilding completely collapsed. The financial crisis caused housing starts to plummet, and a weak labor market couldn’t support a recovery in rents until 2011. By 2015, though, the problem swapped: weak construction levels couldn’t support a recovery in the labor market. Real rents began climbing rapidly and consistently—something that hadn’t happened before in modern American history.

Today, new housing starts are higher than at any point since early 2006—but it’s nowhere near enough to keep up with population growth, let alone make up for the decade of lost construction. The pandemic has driven increased demand for housing as living patterns shift and incomes improve, but construction is falling behind. Supply chain issues are increasing building costs, keeping housing completions low, and preventing many projects from even breaking ground. Underconstruction has pushed vacancy rates to the lowest levels in nearly 40 years, indicating just how severe the housing shortage has gotten.

There may be a construction boom, but it’s a false boom—one dwarfed by the size of the demand it is trying to satiate. Across America (but especially in major cities), it still remains incredibly difficult or outright illegal to build new housing of any type. More and more Americans are moving into lower cost cities in the South and Southeast, but even these places are failing to keep up. The US will still need millions more homes before demand is even close to satiated—and today’s construction boom needs to be placed in the proper context of an acute housing shortage.”