Showing posts with label Global Housing Watch. Show all posts
Friday, June 3, 2022
On cross-country:
On the US:
On other countries:
On cross-country:
On the US:
Posted by 5:00 AM
atLabels: Global Housing Watch
Thursday, June 2, 2022
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.“
Continue reading here.
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.
Posted by 10:29 AM
atLabels: Global Housing Watch
Friday, May 27, 2022
On cross-country:
On the US:
On China
On other countries:
On cross-country:
Posted by 5:00 AM
atLabels: Global Housing Watch
Wednesday, May 25, 2022
From the European Central Bank:
“House prices increased substantially during the pandemic, fuelling concerns about possible price reversals and their implications for financial stability. In many advanced economies, real house price growth exceeded 4% during the pandemic (Chart A, panel a), reaching 4.3% in the euro area in the fourth quarter of 2021[1] amid signs of exuberance in some countries.[2] At the same time, real mortgage lending rates in the euro area have fallen further to reach historic lows in the current low interest rate environment (Chart A, panel b).[3] Against this backdrop, this box discusses the main drivers of recent house price increases across advanced economies and in the euro area, and the associated risks of possible price reversals and the potential implications for financial stability.
Shifts in housing preferences and low interest rates have been important drivers of recent strong house price growth across advanced economies. Estimates based on country-specific Bayesian vector autoregression (BVAR) models indicate that the house price increases across advanced economies during 2020-21 were mainly driven by increased demand for housing. There is a positive correlation between the magnitude of the estimated housing demand shock across countries and the share of teleworkable jobs, signalling that the housing demand shocks are related to a shift in housing preferences during the pandemic (Chart B, panel a), possibly reflecting a desire for more space coupled with less need for commuting.[4] Increased demand for housing could also be related to search-for-yield behaviour in the low-yield environment. In addition, monetary policy shocks combined with mortgage supply shocks contributed to the recent house price increases across advanced economies, including the euro area. Unlike housing demand shocks, monetary policy and mortgage supply shocks move interest rates and house prices in opposite directions.
In the current low interest rate environment, increased sensitivity of house price growth to changes in real interest rates makes substantial house price reversals more likely. Evidence for the euro area shows that a model with an interest rate-dependent sensitivity of real house prices to real interest rates outperforms a model with a constant sensitivity. Such a non-linear model is consistent with asset pricing theory and implies that the lower the level of the real interest rate, the larger should be the response of house prices for a given change in that rate.[5] Given the current low level of interest rates, therefore, potential reversals in residential real estate prices could be larger than several years ago, especially if interest rates increased sharply. In particular, the comparison between estimated linear and non-linear models (Chart B, panel b) for the euro area shows that the estimated house price response to a 0.1 percentage point increase in real mortgage rates from the current very low level is around 28 basis points stronger when accounting for non-linear relationships (Chart B, panel b).[6]
An abrupt repricing in the housing market – if the demand for housing were to go into reverse, for example, or real interest rates were to rise significantly – could produce spillovers to the wider financial system and economy. Such price reversals in housing markets could reflect a return to pre-pandemic work modalities or a strong increase in real interest rates. Other possible factors include a change in investor preferences for holding residential real estate assets, as well as a more general deterioration in risk sentiment related to an exacerbation of geopolitical risks or progressing climate change. The BVAR models described above indicate that a 1% drop in house prices due to a shift in housing demand could, on average across countries, generate a peak drop in real GDP of 0.2% after two years. However, the decline varies from country to country, with a fall of up to 0.9% in some advanced economies and wide uncertainty bands around these estimates. To cushion adverse financial stability implications of potential house price reversals, a tightening of macroprudential measures seems warranted in some countries, especially where strong house price growth has been accompanied by buoyant credit dynamics.[7]“
From the European Central Bank:
“House prices increased substantially during the pandemic, fuelling concerns about possible price reversals and their implications for financial stability. In many advanced economies, real house price growth exceeded 4% during the pandemic (Chart A, panel a), reaching 4.3% in the euro area in the fourth quarter of 2021[1] amid signs of exuberance in some countries.[2] At the same time,
Posted by 11:00 AM
atLabels: Global Housing Watch
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