The Unassuming Economist

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.“

Continue reading here.

From the IMF’s latest report on Cyprus:

On cross-country:

• Drivers of rising house prices and the risk of reversal – European Central Bank
• ECB warns a house price correction is looming as interest rates rise. Central bank says housing market reversal would hit low-income homes harder – FT
• Euro zone’s overpriced housing market may sag if rates rise, ECB says – Reuters
• Has COVID-19 Triggered an Urban Exodus? – OECD
• Asia’s advanced economies now have lower birth rates than Japan. The cost of housing may be the biggest factor – The Economist
• Housing policy and affordable housing – LSE
• Revisiting International House Price Convergence Using House Price Level Data – IDEAS
• Housing and the Labor Market – Oxford Research Encyclopedias   

On the US:    

• Conference: Housing & Urban Economics on September 7 – Stanford University
• Rising Interest Rates Concern Apartment-Building Owners, Renters. Returns fall below mortgage figures, with landlords needing higher rents to fill the gap – Wall Street Journal
• Housing Boom Is on Borrowed Time. Higher rates have only just begun to weigh on home sales and prices – Wall Street Journal
• The housing market boom has at least another year to run, Zillow economists predict – Fortune
• Fed Searches for the Magic Number to Cool a Red-Hot U.S. Housing Market. The central bank must decide on an interest rate that will cap sky-high price growth without triggering a painful economic slowdown – Wall Street Journal
• How Homeowners Can Lock in the Steep Rise in Home Values. For those who don’t want to sell, there are strategies to use to hedge against a future decline – Wall Street Journal
• In Battle for Workers, Companies Build Houses. Disney, meatpacker JBS and others launch plans to add affordable housing near job sites; a Vail, Colo., project draws opposition – Wall Street Journal
• April Rental Report: Sun Belt Metros Drive Sustained Growth in Nationwide Rents – Realtor
• Housing in America has become much harder to afford. High prices and soaring mortgage rates are putting some buyers off – The Economist
• Did the pandemic advance new suburbanization? – Brookings
• Effective Zoning Reform Isn’t as Simple as It Seems. The Biden administration’s housing plan will reward cities that change their land-use policies to promote density. But what kind of zoning reforms really work? – Bloomberg
• Fed Liquidity Facility Successfully Anchored Commercial Real Estate amid Pandemic – Dallas Fed
• Biden is doubling down on dense, affordable housing – Quartz
• Pandemic Housing Boom Hits a Wall With US Buyers Priced Out. Home values in the Sun Belt boomtowns spiked, but now rising mortgage rates, inflation, and recession fears are starting to pinch. – Bloomberg 
• Amid a Housing Crunch, Homes Pop Up on the Fairway. With large expanses of grass and trees, former golf courses are being reconsidered for housing, but developers face challenges, including community resistance. – New York Times
• Housing and Access to Credit Are Two Sides of the Financial Inclusion Coin – San Francisco Fed
• The Household Mystery: Part II – Calculated Risk
• Wall Street’s housing grab continues. As rising rates deter families from buying, being a rentier looks as appealing as ever – The Economist
• US house prices never go down. I mean, they don’t, right? – FT
• Dissecting Housing Supply And Demand: Macro Man Podcast. Bloomberg’s Cameron Crise compares the current state of the housing market with the 2006 bubble peak and its aftermath. – Bloomberg

On China

• China cuts mortgage lending rate by record as lockdowns hit economy. Five-year loan prime rate slashed by most since before pandemic as government steps up stimulus – FT
• China’s property market woes expected to worsen in 2022, Reuters poll shows – Reuters
• China property market slumps on developers’ debt crisis, weak buyer sentiment – Reuters
• China’s Real Estate Slump: Underlying Issues. Although the current approach will ease some major indicators, such as property sales and prices, they will not necessarily resolve the core issues. – The Diplomat

On other countries:  

• [Australia] Housing in the Endemic Phase – Reserve Bank of Australia
• [Australia] Australia’s housing boom to deflate as mortgage rates rise – Reuters
• [Canada] One of the World’s Frothiest Housing Markets Turned Into a Seller’s Headache Overnight. House hunters from Toronto to small Ontario suburbs are changing how they navigate the tight housing landscape with interest rates heading higher. – Bloomberg
• [Canada] How much will Canada’s block on foreign buyers help its housing crisis? – NPR
• [Hong Kong] New Hong Kong Leader’s Vow to Fix Housing Crisis Draws Skeptics. John Lee will focus on national security in wake of protests. Lack of policy, business experience could also hamper ability – Bloomberg
• [New Zealand] New Zealand banks predict 20% drop in house prices over next year. Economists say tighter credit conditions, higher mortgage rates and increased housing supply behind sinking prices – The Guardian 
• [United Kingdom] Nationwide warns inflation surge will hit house prices. Profits double at UK’s largest building society on back of mortgage growth and higher interest margins – FT
• [United Kingdom] Slowdown ahead for UK housing market. Gap between equity-rich house owners and first-time buyers set to widen as cost of living crisis hits – FT
• [United Kingdom] Bridging loans surge as UK buyers scramble for property. Brokers urge caution in volatile market – FT