The Unassuming Economist

From Raj Chetty’s (Harvard University) Testimony Before the House Financial Services Committee:

“Stable housing in high-opportunity neighborhoods can provide a critical foundation for a variety of outcomes such as future earnings, health, and education. Failing to meet our children’s basic housing needs serves to worsen already-stark racial and economic disparities and bar generations from growing up and joining the middle class.

Today, we have an unprecedented opportunity to expand access to neighborhoods that research shows are foundational to children’s and families’ long-term success. Well-designed expansions of the Housing Choice Voucher program, public housing investments, the Housing Tax Credit, and place-based investments could significantly increase housing supply and access to opportunity. Such investments can give all children an opportunity to grow-up in communities that will support their long-term success.

More broadly, to achieve long-term mobility for all children in the United States, we must reduce historic patterns of segregation that have limited access to opportunity-rich neighborhoods, particularly for Black and Hispanic Americans. Equally important, we must also increase opportunity in communities that do not presently see such outcomes. Expanding access to affordable housing can be valuable on both fronts. We must continue to deploy our resources towards increasing options for low- and middle-income families living in areas currently offering high levels of opportunity, and simultaneously to maintain and expand high-quality housing options and community development efforts in areas that currently offer lower levels of opportunity. These strategies will help ensure that all families have a true choice about where to live, reduce the present bifurcation between ‘high’ and ‘low; opportunity areas across the country, and give all children – irrespective of their race, ethnicity, or family income – a chance of achieving the American Dream.”

On cross-country:

• Do Credit Conditions Move House Prices? – NBER
• Call for Papers: ESCP-TAU-UCLA Conference on Low-Income Housing Supply and Housing Affordability, June 14-16, 2022 – American Real Estate and Urban Economics Association
• Call for Policy Papers on Rethinking Cities for Resilience and Growth in the Post-COVID-19 World – Asian Development Bank Institute

On the US:   

• Should You Buy a Home in the US? – Project Syndicate
• NY Fed’s Williams says rising home prices don’t pose financial stability risks – Reuters
• America’s Housing Boom Will Keep Builders and Agents Busy. There is no more off season any more for housing as builders and buyers make up for lost time – Wall Street Journal
• Housing Market Shows Cracks With Price Cuts in Pandemic Boomtowns. In places like Boise, homebuyers are gaining an edge after a real estate frenzy. – Bloomberg
• The Market for Single-Family Rentals Grows as Homeownership Wanes. House hunters are attracted to the hassle-free living and lack of down payments, but there’s a trade-off: They give up the investment of owning a home. – New York Times
• Pelosi tries to salvage housing aid. The White House as of Friday was refusing to go above $150 billion for housing, according to two people familiar with the talks. – Politico
• How Private Equity Landlords are Changing the Housing Market – Cato Institute
• The Economic Burden of Pension Shortfalls: Evidence from House Prices – NBER
• New York Fed Releases White Paper on Effective Eviction Prevention and New Data Collection Efforts Focused on Renters and Landlords – New York Fed
• Why America’s real estate industry is so racist. MacArthur Fellow Keeanga-Yamahtta Taylor writes about how, 53 years after the Fair Housing Act, Black families still face rampant housing discrimination. – Fast Company
• Commercial Real-Estate Sales and Values Surge to Records. Investors hunting for yield gobbled up apartment buildings, life-science labs and industrial properties during the third quarter – Wall Street Journal
• Congress isn’t going to save the housing market. Build Back Better doesn’t build enough. – Vox

On China

• China expands property tax trials in next step of ‘common prosperity’ drive. Xi Jinping backs plan to test levy that could alter country’s economic model – FT
• China’s new property tax may prompt owners of multiple homes to sell down their holdings before prices take a hit, say analysts. – South China Morning Post
• How China Is Rolling Out a Property Tax on Homes, and Why – Bloomberg
• Another Chinese property developer defaults, shares drop – Reuters
• The effect of homeownership on migrant household savings: Evidence from the removal of home purchase restrictions in China – Economic Modelling

On other countries:  

• [Germany] In Berlin 85% of people rent their homes — and prices are spiralling. The end of a rental cap and a shortage of stock are making the German capital unaffordable for many – FT
• [Hong Kong] Hong Kong house prices fall by the most in nearly a year as volatile stock market hits buying sentiment – South China Morning Post
• [Italy] Why Americans and Britons Are Rushing to Buy Idyllic Homes in Italy. A range of tax incentives, relatively lower prices and the potential for working remotely is driving up demand from house hunters overseas. – Bloomberg
• [Namibia] How innovative construction could ease Namibia’s housing crisis – World Economic Forum
• [Singapore] The go-go property market doesn’t have legs. Stretched valuations, worsening demographics and policy risks are flashing warning signs – The Straits Times
• [Thailand] Thai central bank eases mortgage rules to support property sector – Reuters
• [United Kingdom] Will the UK embrace long fixed-rate home loans? Lenders have been slow to heed Boris Johnson’s call to action on mortgage terms – FT

On cross-country:

• IMF urges caution as house prices surge globally – Irish Examiner
• Creating Housing Markets in Emerging Market Economies – IFC
• Warning: Some Transaction Prices can be Detrimental to your House Price Index – University of Graz

On the US:   

• RV Capital of America Tops WSJ/Realtor.com Housing Index in Third Quarter. Index ranks cities for appreciating housing markets and lifestyle amenities – Wall Street Journal
• Construction on new homes slows as supply-chain woes hit the housing market. The number of housing projects completed in September fell to the lowest level in over a year – Market Watch
• U.S. homebuilding stumbles as supply constraints mount – Reuters
• Another upward force on American inflation: the housing boom. Property could join energy, shipping, used cars and wages as a contributor to rising consumer prices – The Economist
• Immediate and Longer-Term Housing Market Effects of a Major U.S. Airport Closure – NBER
• Do Restrictive Land Use Regulations Make Housing More Expensive Everywhere? – Economic Development Quarterly
• Psychoanalyzing the Housing Frenzy With Redfin’s CEO. The emotional and financial stakes of buying a home have never been higher. – Curbed

On China

• China new home prices hit by first month-on-month fall since 2015. Data reveal price decline in big cities in September as weakness in real estate sector reverberates – FT
• Chinese developer Sinic defaults as Evergrande deadline looms. More companies miss debt payments as country’s real estate sector contracts in third quarter – FT
• Evergrande: concerns linger even as embattled developer’s Hengda unit makes interest payment on US$327 million onshore bond. – South China Morning Post
• Evergrande’s debt crisis sates appetite for risk, forcing 206 plots to withdraw from China’s land auctions since September – South China Morning Post
• Housing slowdown threatens China’s economic muscle – Axios
• China’s property and construction sectors contract in third quarter as Evergrande crisis and tougher regulation hit home – South China Morning Post
• In Tackling China’s Real-Estate Bubble, Xi Jinping Faces Resistance to Property-Tax Plan. After negative feedback from within the party, an initial proposal to test a property tax in some 30 cities has been significantly scaled down – Wall Street Journal
• Time for orderly resolution for Evergrande is running out. If the state has a grand plan, it will need to make it known soon – The Economist

On other countries:  

• [New Zealand] New Zealand plans new housing density laws to tame red-hot property market – Reuters
• [New Zealand] Sweeping housing legislation could reshape New Zealand cities for decades to come. Housing campaigners welcome changes, saying they will boost businesses, lower emissions and enable better transport links – The Guardian
• [Turkey] Housing prices in emerging countries during COVID-19: evidence from Turkey – International Journal of Housing Markets and Analysis
• [United Kingdom] The problem with new-build property. It loses its premium over time, so mortgage providers are more reluctant to lend to those with small deposits – FT
  

On cross-country:

• Euro Area Housing Markets: Trends, Challenges & Policy Responses – European Commission
• Do Foreign Buyer Taxes Affect House Prices? – SSRN

On the US:   

• 10th Annual Housing Conference – American Enterprise Institute
• Why the U.S. Housing Boom Isn’t a Bubble – Wharton
• Borrower Expectations and Mortgage Performance: Evidence from the COVID-19 Pandemic – FHFA
• This Year, Half as Many Metro Areas Are Affordable to Low-Income Homebuyers as Last Year – Harvard Joint Center for Housing Studies
• Maxine Waters ready to battle over potential cuts to housing aid. Waters, who proposed the funding as chair of the House Financial Services Committee, said in an interview that “I’m going to fight as hard as I can to keep as much housing as I can in the reconciliation bill.” – Politco
• Millennials Team Up to Fulfill the Dream of Homeownership. Burdened by debt and facing soaring home prices, first-time home buyers are pooling their finances with partners, friends or roommates – Wall Street Journal
• Is There a Relationship Between Regional Unemployment Rates and Older Adult Housing Stability? – Harvard Joint Center for Housing Studies

On other countries:  

• [Australia] RBA Says Risks Remain for Excessive Borrowing, House Prices – Bloomberg
• [Australia] RBA Sees Financial Stability Risks From Record-Low Rates, Housing Boom – Wall Street Journal 
• China’s Harbin lends hand to property firms; Morgan Stanley upgrades sector view – Reuters
• [United Kingdom] Return of the renters: price hikes, bidding wars and bribes. As cities relax pandemic restrictions and workers move back, competition for rented property is fierce – FT  
• [United Kingdom] Boris Johnson’s Housing Headaches Aren’t Over Yet. His Conservative government has signaled it won’t be obsessed with building homes. That’s fine, but Britain still needs more affordable housing. – Bloomberg
• [United Kingdom] Michael Gove urged to address loss of half a million social homes in England. Campaigners challenge new housing secretary to help more than 1m families on waiting list – FT
  
  

Wharton’s Benjamin Keys explains why the red-hot U.S. real estate market isn’t a bubble that’s ready to burst. Home prices are likely to stay high for years to come:

“In Philadelphia, the median home price has risen 48% in the last decade. In Atlanta, the median sale price of a metro home hit an all-time high in June of $372,500. Not to be outdone by big cities, Boise, Idaho, recently ranked as the nation’s most overvalued market, where homes are selling for nearly 81% more than they should.

While the red-hot real estate market is finally showing signs of cooling, its meteoric rise has many Americans wondering if housing prices are a bubble that is about to burst, much like the collapse that triggered the Great Recession.

Wharton real estate and finance professor Benjamin Keys says that’s not the case.

“I come down very strongly against that view. I don’t think that it’s likely that we’re going to see a bubble burst in the way that we saw in 2008, 2009, and 2010,” he said during an interview with Wharton Business Daily on SiriusXM. (Listen to the podcast above.)

Although the frenzied buying and inflated prices are reminiscent of the run-up to the recession, Keys said there are several factors that make the current market different. First, loan standards that were loosened during the bubble are much tighter now, with stringent requirements for good credit, complete documentation, and a sizeable down payment. In contrast, the pre-recession years were pocked with subprime mortgages, low teaser interest rates that ballooned, weak underwriting, negatively amortized construction, and other questionable practices.

Second, the boom of the early 2000s was also driven by a surge in home construction that led to abundant supply. But there’s been a building shortage over the last 10 years, especially in cities with high demand. The result is a supply-demand mismatch that can’t be resolved quickly or easily.

“I think there was a bit of a hangover coming out of that 2000 boom and bust, and we’re underbuilt in a lot of cities where there’s demand for jobs, where there’s demand for housing,” Keys said.”

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