The Unassuming Economist

On cross-country:

• ECB warns of ‘exuberance’ in housing, junk bonds and crypto assets. Investors taking risks in search for yield has left markets ‘susceptible to correction’ – FT
• ECB sees rising risk that housing bubble will burst – Reuters
• The euro area housing market during the COVID-19 pandemic – European Central Bank
• As housing costs rocket, governments take aim at large investors. The approach is politically expedient, but it may not make housing cheaper – The Economist
• The oldest asset class of all still dominates modern wealth. Low interest rates in advanced countries have pushed money into real estate instead of business investment – FT
• Making Homes More Affordable in IDA Countries Through Expanded Mortgage Financing – World Bank

On the US:   

• Fannie Mae, Freddie Mac to Back Home Loans of Nearly $1 Million as Prices Soar. Scheduled increase in loan limits is a boon for borrowers but also stokes debate over government’s role in housing market – Wall Street Journal
• A Housing Gift for Beverly Hills. Just what the economy doesn’t need: subsidies for $1 million mortgages. – Wall Street Journal
• Homes Now Typically Sell in a Week, Forcing Buyers to Take Risks. Buyers are often waiving traditional safeguards in fast-moving market where median price has climbed – Wall Street Journal and Quartz
• Democrats have no plan to fight housing inflation. Home prices have skyrocketed, and the White House’s plan will do basically nothing to stop it. – Vox
• Why building more affordable housing won’t solve the crisis – Yahoo
• Housing inflation is getting worse. Will Biden’s ‘Build Back Better’ program help renters and buyers? – MarketWatch
• States can improve housing well-being through thoughtfully designed policies – Brookings
• How the Pandemic Worsened a Housing Crisis in the Bronx. In a New York City borough where residents have long struggled to afford their homes, thousands are now threatened with eviction as state pandemic aid dwindles. – New York Times
• Mortgage Refinance Costs and a Better Adjustable-Rate Mortgage Contract – Richmond Fed
• Biased appraisals and the devaluation of housing in Black neighborhoods – Brookings
• Grown Kids Still Stuck at Home? Change Is on the Horizon. Someday, surely, all the young adults still living with their parents will form their own households, creating steady housing demand. But only if prices stop going up so fast. – Bloomberg
• Want More Affordable Housing and Health Care? Here’s a Fix. – New York Times
• Despite Supply Chain Issues, U.S. Builder Confidence Upticks in November – World Property Journal
• What Went Wrong With Zillow? A Real-Estate Algorithm Derailed Its Big Bet. The company had staked its future growth on its digital home-flipping business, but getting the algorithm right proved difficult – Wall Street Journal  
• Research: Restricting Airbnb Rentals Reduces Development – Harvard Business Review

On China

• China home prices fall as property slowdown threatens economic outlook. Beijing introduced measures aimed at constraining borrowing at developers over asset bubble fears – FT
• Worst yet to come for China’s housing market as new home prices fall by most in 6 years. The average price across 70 cities dropped 0.25 per cent in October from the previous month, data shows, as analysts warn that doesn’t give the full picture. Developers are seeing a big slump in sales amid a credit crunch sparked by the debt crisis at China Evergrande – South China Morning Post
• How Wealth Products Helped Inflate China Real Estate – Quartz
• China’s real estate woes sap property investment products – Reuters
• China walks a tightrope on property clampdown – Reuters

On other countries:  

• [Canada] Housing Market Heats Back Up in Canada With 8.6% Jump in Sales – Bloomberg
• [Israel] Bank of Israel Plans to Increase Competition in Mortgage Market – Bloomberg
• [Spain] If health and education are essential services in Spain, why not housing? A renters’ movement in Catalonia is saving families from eviction and trying to fill the gap left by the state – The Guardian
• [Spain] Spain takes on private equity landlords as cost of housing soars. Blackstone and others could face rent caps in bill championed by leftwing government – FT
• [Switzerland] The Local Effects of Relaxing Land Use Regulation on Housing Supply and Rents – SSRN

From Conversable Economist:

“Everyone knows that lots of people have ended up working from home, either part-time or full-time, since the start of the pandemic. But I’m not sure many of us have appreciated how extraordinary that shift has been. In effect, an enormous amount of what economists would classify as “residential capital” was converted to commercial real estate almost overnight: that is, people used their places of residence along with capital that had often been installed at their place of residence mostly for other purposes (like entertainment) to do their work.

The size of the shift is remarkable. Janice C. Eberly, Jonathan Haskel and Paul Mizen discuss “Potential Capital: Working From Home, and Economic Resilience” (NBER Working Paper 29431, October 2021, subscription needed). They compare the drop in economic output from the workplace in the first two quarters of 2020 to the overall drop in economic output: in the US economy, for example, they find that output in the workplace fell by about 17%, but total economic output actually fell about 9%. Work done outside the conventional workplace made up the difference.

This built-in resilience of the economy may now seem pretty obvious, but it wasn’t obvious (at least to me) before the pandemic hit. The magnitudes here are enormous. According the US Bureau of Economic Analysis, the value of residential real estate in 2020 was almost $25 trillion. Privately owned nonresidential structures were worth almost $16 trillion, while the equipment in those structures was another $7 trillion. In short, trillions of dollars of residential capital replaced trillions of dollars of nonresidential capital in a very short time. The transition was far from seamless or painless, of course, but the fact that it happened at all is worth a gasp.”

Continue reading here.

From a VoxEU post by Daniel Waldenström:

“Since 1950, private wealth-income ratios have grown steadily around the Western world, accelerating after 1990. Figure 3 examines this development by decomposing private wealth into three asset groups: housing wealth, pension wealth, and other wealth. 

The main result is that private wealth underwent a structural shift over the 20th century. Around 1900, wealth was dominated by agricultural estates and corporate wealth, assets predominantly held by the rich. During the post-war period, wealth accumulation came mainly in housing and funded pensions, which are assets held by ordinary people. This compositional trend had important distributional implications.”

Figure 3 Decomposing aggregate wealth-income ratios since 1890

Continue reading here.

From the IMF’s latest report on Netherlands:

“Real estate markets call for heightened vigilance and the pursuit of policies to address near-term risks and long-term challenges confronting residential and commercial properties. Prices – and valuations – for housing have continued to soar during the pandemic (see chart), reflecting longstanding supply bottlenecks, low interest rates, and the favorable tax treatment of owner-occupied housing. Existing vulnerabilities have been exacerbated by a further rise in already elevated levels of mortgage debt, with some households exceedingly stretching their debt servicing capacity. Consequently, the activation of floors for risk weights applied to mortgage lending from 2022 is welcome and may be complemented by measures such as an additional reduction in eligible loan-to-value ratios, and reviewing the taxation of owner-occupied housing. In addition, efforts to improve the elasticity of the housing supply appear warranted, as structural rigidities, such as distorted planning incentives and restrictive building or zoning laws, maintain imbalances. Such policies will also support macroeconomic stability by lessening households’ exposure to house-price fluctuations, which can significantly affect consumer spending.

Vacancy rates for commercial properties have increased due to the recession yet with little effect on prices as investment yields have stayed attractive in relation to other assets. With banks maintaining comparatively large exposures, valuation has become a concern, especially since long-term structural change may prevent the full recovery of some property segments. The authorities should contemplate options to better steer the investment cycle of commercial real estate to avoid a build-up of financial stability risks, potentially modelled on policies in place for owner-occupied dwellings. Furthermore, incentivizing climate-friendly modernization or the rededication of obsolete structures should help preserve the value of existing buildings.”

On cross-country:

• Prime Global Cities Index – Q3 2021 – Knight Frank

On the US:   

• The U.S. Housing and Mortgage Market: Risks and Resilience – FED
• Fed’s Bowman sees risks in housing market, flags inflation pressure – Reuters
• A different kind of housing bubble – FT
• ‘Zillow: the models underneath a housing hedge fund did not hold. Company deserves credit for pulling the plug quickly and retreating to its successful core – FT
• How Zillow got rocked by the housing market – Quartz
• Zillow’s home-buying debacle shows how hard it is to use AI to value real estate – CNN
• Single-Family Rental Firms Eye Zillow’s Housing Stock. Interest comes as Zillow gets ready to shut down its home-flipping business – Wall Street Journal
• A whodunnit on Zillow. Lessons for America’s housing market – The Economist
• Red-Hot Housing Market Drives Biggest Home-Equity Drawdown Since 2007. Homeowners are tapping into their properties’ equity to fund renovations, invest in stocks and more. – Wall Street Journal 
• Why Home Buyers Should Comparison Shop for Mortgage Rates—but Don’t. Even a small difference among interest-rate offerings can add up to noticeable savings – Wall Street Journal
• The Price of Living in ‘Paradise’ Is Higher Than Ever. Land and homes in Hawaii, never inexpensive, are more in demand in these days of remote working — as in remote from the U.S. mainland. – New York Times
• COVID, Race, and Housing Insecurity – Harvard University
• A surge in the US affordable housing supply is coming from people who can’t afford their homes – Quartz
• Will the Democrats’ ‘Build Back Better’ Bill Do Anything to Fix Zoning? Will the “Unlocking Possibilities” program be an effective way to spark zoning reforms—or just a subsidy to planning consultants? – Reason 
• Movie studios are good neighbors – if you like rising house prices – LSE
• How Data Is Reshaping Real Estate. Tech start-ups are offering new tools to help retailers and entertainment venues be more efficient by counting crowds, tracking foot traffic and following local shopping habits. – New York Times
• The Possible Impacts of Remote Work on Cities, Neighborhoods, and Households – Harvard Joint Center for Housing Studies
• Schumer scores billions for New York’s decaying public housing. The jockeying over the housing funds is one of many emerging sources of political tension surrounding President Joe Biden’s bill. – Politico
• Rent Control Backfires Again in St. Paul. Voters put on a 3% cap. You’ll never guess what developers did next. – Wall Street Journal

On China

• China struggles to regulate house prices despite glut of controls. Evergrande debt crisis prompts other developers to offer discounts, worrying authorities – FT
• Fed warns ailing China real estate sector poses risks to US economy. Central bank also monitoring volatility in meme stocks, per closely watched semi-annual report – FT, New York Times and CNBC
• Chinese developer Kaisa pleads for help as Fed warns of risks – Reuters
• Evergrande dodges default again; property sector debt concerns linger – Reuters
• China’s Plan to Manage Evergrande: Take It Apart, Slowly. Beijing is working on a controlled implosion of the real-estate giant, selling off some assets while limiting damage to home buyers and businesses – Wall Street Journal
• Kaisa says trying to solve liquidity issues, pleads for ‘more time and patience’ – Reuters
• Chinese developer Kaisa pleads for ‘patience’ as market strife spreads. Real estate groups including Evergrande rush to sell assets as contagion reaches higher-rated debt – FT
• As China’s Property Crisis Spreads, Beijing Says There’s Nothing to See. Global markets just weeks ago were fretting over the possible failure of Evergrande. Now the developer says the worst is over, even as other companies show signs of trouble. – New York Times
• China’s Economy Faces Risk of Yearslong Real-Estate Hangover. Booming market helped juice growth for more than a decade; without it, China could struggle to match previous pace, economists say – Wall Street Journal
• Deadline looms for Evergrande payment amid contagion fears – Al Jazeera
• Speculation nation: Can Xi Jinping’s property tax deflate China’s housing bubble? President faces an uphill battle to undo a system that has led to a bloated property sector – The Guardian
• China doesn’t have a housing bubble. Here’s why. China needs a large and vibrant real-estate sector to build enough housing in its big cities to meet the urbanisation demand in the next 10-20 years. Its high levels of savings and investment should also be seen as a blessing, especially given the costly necessary transition to clean energy – South China Morning Post
• China’s harsh medicine for property sector, local government debt could cause chaos, economists warn
• Beijing’s stricter regulation of local government borrowing and real estate developers increase the risks that some of them may run out of cash, analysts say. Defusing financial risk was one of three economic priorities set by Chinese President Xi Jinping four years ago, which has seen scrutiny of hidden local government debts  – South China Morning Post
• How does Affordable Housing Supply Affect Commercial Housing Prices: Crow out Supply or Divert Demand？- Journal of Finance and Economics
• China real estate firms may issue inter-bank market debt – Securities Times – Reuters
• Why China’s Real Estate Slowdown Isn’t Like Japan’s – Bloomberg 

On other countries:  

• [Australia] Widespread money laundering in property locking out Australians from owning homes, Senate told. Australia now ‘destination of choice’ for flow of illicit funds, anti-corruption expert says – The Guardian
• [Hong Kong] Hong Kong’s property barons set to benefit from affordable housing drive. City’s developers well-positioned to capitalise on Beijing’s efforts to promote social justice – FT
• [Ireland] Remote working linked to surge in house prices outside Dublin. Increased demand from those looking to relocate putting pressure on rural prices – The Irish Times
• [New Zealand] One of the World’s Hottest Real-Estate Markets Tries to Cool Down. New Zealand is pulling every lever to tame property prices without shaking its economy and crashing the market – Wall Street Journal  
• [United Kingdom] How does house price indexation affect the valuation of equity release mortgages? – Bank of England
• [United Kingdom] Return of super-rich to central London fuels house price surge. Property prices in city’s most expensive district rise by almost 7% as Covid restrictions ease – The Guardian
• [United Kingdom] Signs of a cooling housing market are too late for those hoping for better affordability. Talk has turned to an interest rate rise but the RBA says that’s still a way off – The Guardian
• [United Kingdom] Higher interest rates mean more expensive mortgages. But changes in the British housing market mute their effect – The Economist
• [United Kingdom] Property prices fall in upmarket London boroughs. Westminister and Kensington and Chelsea among those hit by pandemic-driven ‘race for space’ – FT
• [United Kingdom] Will UK house prices fall as interest rates rise? While rates are expected to rise over the next year, forecasts about price growth vary from a slowdown to an outright contraction – FT