The Unassuming Economist

From the IMF’s latest report on the US;

“The housing market has been on a steep upward trajectory. Nationwide, average prices are 38 percent above where they were at end-2019 and prices are relatively high as a share of both rents and household income. Leverage, though, has been contained by relatively low loan-to-value ratios and conservative underwriting standards (a legacy of the post-financial crisis reforms). In addition, refinancing activity over the past few years has reduced average mortgage payments to all-time lows as a share of disposable income. As such, financial stability risks emanating from the housing market appear to be contained. However, there are important social concerns linked to the worsening in housing affordability, particularly for lower income households.”

From the IMF’s latest report on Ireland:

“The pandemic has exacerbated housing market’s imbalances, contributing to accelerating prices despite the recent acceleration in housing construction. Double-digit price growth has further pressured affordability as price-to-income and price-to-rent ratios increased sharply in recent quarters. House completions recovered in 2021 but were still below 2019 levels.

Housing commencements have accelerated to the highest number since the GFC, but the construction sector is facing combined headwinds of input cost inflation and labor shortages.

CRE activities performed better than expected during the pandemic. Investment in the sector was exceptionally strong in 2021 and this momentum is expected to continue in 2022. The polarization between different sectors that characterized the Irish property investment market stems from the higher return to investment in CRE than residential, partly due to the strong growth of MNEs, Brexit-related relocations to Ireland, and businesses’ general resilience despite the pandemic.

Supply-side policies should be further strengthened. The government has introduced a comprehensive fiscal and regulatory package (Housing for All18), costing close to 1 percent of GDP annually, to address the affordable housing shortage. The package includes measures to improve zoning, planning, land availability, and social housing. Timely implementation of these measures is needed and should be accompanied by additional policies aimed at raising productivity in the construction sector. The “First Home” affordable purchase shared-equity scheme (starting in 2022:Q3) aims to support first home buyers. However, it does not address the supply bottlenecks. While the scheme is partly targeted and limited in size, if expanded it can put further upward pressure on prices.

Improving construction productivity is needed to bolster housing supply. The construction sector is fragmented, lagging on digitalization, and faces high input costs and labor shortages. Complex and lengthy processes for obtaining occupational licenses, with excessively long apprenticeship requirements, raise barriers to entry and contribute to substantial bottlenecks and high costs of construction. In recent years, the government has taken some steps toward digitalization of the construction sector, upskilling and reskilling workers, including by increasing the number of apprenticeship centers. There is also a need to streamline the lengthy, cumbersome, and uncertain zoning and permit processes.

The government is implementing a set of comprehensive measures under “Housing for All – A New Housing Plan for Ireland” aimed at alleviating the housing shortage. Establishment of the Construction Sector Innovation and Digital Adoption Subgroup by the government and the industry is welcome to deliver on the seven priority actions detailed in the Building Innovation Report. The Construction Sector Group ensures regular and open dialogue between government and industry on how best to achieve and maintain a sustainable and innovative construction sector in order to successfully deliver on the commitments in Project Ireland 2040.”

From the IMF’s latest report on Vietnam:

“Property and corporate bond markets risks are rising. Easy financial conditions contributed to record-high corporate bond issuances and equity and property market valuations. Price pressure points are largely seen in land sales, high-end housing in major cities, and mega-developments in coastal areas. Besides sizable direct exposure to the real estate sector in their loan portfolios, banks face indirect exposure through holding of corporate bonds issued by real estate companies. These companies have fairly robust debt servicing capacity but are more leveraged than the rest of the economy, and some were hit hard by the pandemic-induced drop in tourism. Recent policies to moderate systemic risks include measures to limit excessive leverage (e.g., higher risk weights for real estate) and recommendations urging prudent loan origination, particularly for property purchases.”

On cross-country:

• Prime residential rents in global cities rising at fastest rate since 2010 – Knight Frank
• The Impact of Home Sharing on Housing Affordability. Evidence from Airbnb in Urban Cities in Europe – Jonkoping University

On the US:    

• Written testimony for hearing by Jenny Schuetz: Where Have All the Houses Gone: Private Equity, Single Family Rentals, and America’s Neighborhoods – Brookings
• Home Sellers Are Slashing Prices in Sudden Halt to Pandemic Boom. The rapid rise in mortgage rates is cooling demand, jolting markets from coast to coast – Bloomberg  
• Biden Administration Weighs Move to Trim Mortgage Costs as Home Prices Rise. Mortgage industry officials say insurance cut for FHA-backed loans would help entry-level buyers; Republicans say it could increase prices – Wall Street Journal
• Redfin’s chief economist says the housing market correction has begun—and things are going to get worse before they get better – Fortune
• Inflation is making homelessness worse – Washington Post
• Volatility in Home Sales and Prices: Supply or Demand? – Federal Reserve Board
• Pandemic-Induced Remote Work and Rising House Prices – NBER
• Construction Job Openings Leveling Off – NAHB
• Lessons Learned from Mortgage Borrower Policies and Outcomes during the COVID-19 Pandemic – Boston Fed
• Mortgage Rates Fall to 5.30%, Reflecting Recession Fears. Rates fell for a second straight week, though they are still up significantly this year – Wall Street Journal

On China

• My garlic for a home: China struggles to revive property sector. The real estate market is struggling to recover as zero-Covid policies and developer debt sap buyer demand – FT
• China Property Debt Crisis Is Just Beginning, Charlene Chu Says. Charlene Chu sees further problems for China real estate. Ex-Fitch analyst says debt weighing on China economic growth – Bloomberg

On other countries:  

• [Austria] How Vienna took the stigma out of social housing. In some European cities living in social housing is a misfortune. In Austria’s capital it’s an indicator of high-quality urban life. – Politico
• [Australia] Australian house prices fall for second month as interest rates rise. CoreLogic’s home value index drops for the second month in a row, after declining 0.6% in June – The Guardian
• [United Kingdom] The signs are Britain is not heading for a property crash. It would be naive to rule out the possibility, but the evidence points to house prices dampening rather than tumbling – The Guardian

On cross-country:

• 2nd Workshop on Rent Control: Slides of presentations – PPT and Video
• The Global Housing Inspection Report – 2022 Edition – Seeking Alpha
• Land speculation, booms, and busts with endogenous phase transitions: A model of economic fluctuations with rational exuberance – VoxEU

On the US:    

• Can the Fed pull off a controlled slowdown of the housing market? The events of the early 1980s might provide a guide – The Economist
• ‘Coast to Coast’ Housing Correction Is Coming, Says Moody’s Chief Economist. US home prices will likely fall in the most overvalued markets, projects Mark Zandi. But it will fall short of a crash. – Bloomberg
• Cost of Owning a Home Surges Above the Cost of Renting One. A new report shows that having a mortgage is far more expensive than having a lease, a disparity that is helping to cool a red-hot housing market. – New York Times
• Demand Shifting from Owning to Renting – John Burns Real Estate Consulting
• As For-Sale Demand Weakens, Single-Family Rentals Outperform – John Burns Real Estate Consulting
• ‘Coast to Coast’ Housing Correction Is Coming, Says Moody’s Chief Economist. US home prices will likely fall in the most overvalued markets, projects Mark Zandi. But it will fall short of a crash. – Bloomberg
• Home Sellers Are Getting Anxious. ‘They Feel Like They Missed the Height of the Market.’ – Barron’s
• Bidding Wars Overheated the Home-Buyer Market, Now They’re Coming for Renters. Competition among renters means many tenants feel compelled to pay more each month than what the landlord is asking – Wall Street Journal
• Credit Conditions in the Pandemic Mortgage Market – San Francisco Fed
• Hottest US Housing Markets Now Have Bigger Share of Price Cuts – Bloomberg
• Transcript: Jonathan Miller – The Big Picture 
• Highest Mortgage Rates Since 2008 Housing Crisis Cool Sales. As the Federal Reserve tries to fight high inflation, costly mortgage rates have begun to price people out of the housing market – New York Times
• Disquiet Over the Housing Market Is Only Growing. The Fed needs to remove the heat from demand without prompting an accident among mortgage financiers – Bloomberg
• Blackstone dealt legal setback after $5bn low-income housing deal. Private equity group says it is working to resolve litigation inherited with AIG property portfolio – FT  
• Did Housing Affordability Worsen During the First Year of the Pandemic? – Joint Center for Housing Studies
• A Hot Housing Market Is a Financial Crisis Risk. The longer prices defy the Fed, the harder the Fed might try to break them. – Bloomberg

On China

• Empirical evidence of risk contagion across regional Chinese housing markets – Economic Modelling
• Chinese Property Titan Says Housing Market Has Reached Bottom – Bloomberg

On other countries:  

• [Australia] House Prices, Monetary Policy, and Commodities: Evidence from Australia – University of Sydney
• [Japan] Japanese house prices rising strongly, but demand slowing – Global Property Guide
• [Portugal] Portugal Home Prices Rise Faster Than Ever on Lack of Supply – Bloomberg
• [Spain] How fiscal policy affects housing market dynamics: Evidence from Spain – Bulletin of Economic Research
• [United Kingdom] Covid couldn’t cool house prices, but the economic chill might. Data due this week will be closely scrutinised to discern whether the market’s remarkable resilience is faltering – The Guardian
• [United Kingdom] Short-term lets face stricter rules as review gauges impact on tourist hotspots. Concern over proliferation of Airbnb-style rentals in popular holiday destinations spurs action – FT