The Unassuming Economist

From a paper by Emmanouil Sofianos, Christos Alexakis, Periklis Gogas, and Theophilos Papadimitriou:

“This paper aims to forecast deviations of the US output measured by the industrial production index (IPI), from its long-run potential output, known as output gaps. These gaps are important for policymakers when designing relevant economic policies, especially when a negative output gap may show economic slack or underperformance, often associated with higher unemployment and low inflation. We use a dataset that includes 32 explanatory economic and financial variables and 18 lags of the IPI, spanning the period from 2000:1 to 2022:12, resulting in 50 variables and 276 monthly observations. The dataset is fed to five well-established machine learning (ML) methods, namely decision trees, random forests, XGBoost, long short-term memory (LSTM) and support vector machines (SVMs), coupled with the linear, the RBF and the polynomial kernel. Moreover, we use the standard elastic net logit method from the area of econometrics as a benchmark. Our results indicate that the tree-based ML techniques perform better in-sample, and the best overall forecasting model is the XGBoost achieving an out-of-sample accuracy of 91.67%.:

From a VoxEU post by Ralph De Haas, Pablo García Guzmán, Zsóka Kóczán, and Victoria Marino:

“The Life in Transition Survey collects data on household income, employment, education, attitudes, beliefs, and personal experiences across 37 economies in emerging Europe, the Caucasus, Central Asia, and North Africa. This column introduces the 4th wave of the survey, which reveals declining intergenerational mobility in post-socialist economies, growing inequality of opportunity, and trade-offs between wages and job benefits. It also documents substantial wage premiums for digital skills and how concerns about climate change often fail to translate into support for environmental policies. The (publicly available) data can generate valuable insights for policymakers working to promote inclusive growth and social cohesion in emerging economies.”

Working papers and conferences:

• Are Big Cities Important for Economic Growth? – NBER
• Working from home: Effects on housing demand and inequality – European Central Bank
• Rising Interest Rates, Mortgage Rate Lock, and House Price Fluctuations – SSRN
• Modelling and forecasting House Prices: The case of the Greek economy – SSRN
• European Energy Crisis: Did Electricity Prices Shock Real Estate Markets? – SSRN
• Spatial Dispersion in Returns to Rental Housing: A Decomposition of Local Rent-Price Ratios – SSRN
• Monetary Policy, Property Prices and Rents: Evidence from Local Housing Markets – SSRN
• Housing Wealth Across Countries: The Role of Expectations, Institutions and Preferences – CEPR
• 12 books about housing, cities, and more to read this spring. New books by Ezra Klein, Derek Thompson, Russell Shorto, and more – The New Urban Order

On the US—developments on house prices, rent, permits and mortgage:    

• US Mortgage Rates Approach 7% in Ominous Sign for Housing Market. MBA’s measure of rate on 30-year mortgage rose to 6.97%. Home-purchase applications fell almost 7% during holiday week – Bloomberg
• US 30-Year Mortgage Rate Just Shy of 7% Weighs on Home Purchases. Applications index for home purchases lowest since February. Expectations for fewer Fed rate cuts keep financing costs high – Bloomberg
• Here’s where mortgage rates could be headed in 2025 – The Hill
• The ‘Hidden Force’ That Can Bring Mortgage Rates Down. How home buyers could get a little break even if yields stay high – Wall Street Journal 
• Mortgage Applications Increase Marginally in December – NAHB
• December 2024 Monthly Housing Market Trends Report – Realtor.com
• Home Prices Continue to Slow in October – NAHB
• Inflation Adjusted House Prices 1.3% Below 2022 Peak. Price-to-rent index is 8.1% below 2022 peak – Calculated Risk 
• After recent successes, Twin Cities region’s housing-supply progress slips. With fresh data from 2023, the Regional Housing Affordability Dashboard monitors trends in the Twin Cities regional housing market – Minneapolis Fed
• 1st Look at Local Housing Markets in December – Calculated Risk
• New Listings Rise 8%, Giving the New Year’s Buyers More Homes to Choose From – Redfin
• Moody’s: Apartment Vacancy Rate Increased in Q4; Office Vacancy Rate at Record High – Calculated Risk
• Pandemic-Era Demand Squeezed Housing Inventories – San Francisco Fed
• Asking Rents Mostly Unchanged Year-over-year – Calculated Risk
• Morgan Stanley: Rising inventory to push down U.S. home prices in 2025. Among the 26 home price forecast models tracked by ResiClub, Morgan Stanley is the most bearish on 2025. – Fast Company

On the US—other developments:    

• What’s Ahead for Real Estate in 2025? Wharton’s Susan Wachter is cautiously optimistic for the year ahead, noting that reining in inflation is the key to reviving real estate markets. – Wharton
• Housing Sentiment Finishes 2024 Higher Despite December Dip. Mortgage Rate Optimism Primary Driver of Year-over-Year Improvement – Fannie Mae
• Fannie and Freddie Stocks Surge on Hope for End to U.S. Control. It Won’t Be Easy. – Barron’s
• US homebuilder shares slide on fears of higher rates and Trump tariffs. Threat of rising costs brings post-pandemic rally to a halt – FT
• The US Government Is Sitting on a Possible Solution to the Housing Crisis. The idea of opening up public lands to development enjoys bipartisan support and cuts through red tape. – Bloomberg
• Trump’s housing market conundrum – CNN
• Will Homeowners Finally Sell in 2025? Here’s What the Experts Say, Amid a Glimmer of Hope – Realtor.com
• Questioning the Housing Crisis: A Different Approach to Estimating Housing Availability – Cato Institute
• New Projections Anticipate a Slowdown in Household Growth and Housing Demand – Harvard Joint Center for Housing Studies
• Redfin Reports Housing Affordability Didn’t Worsen in 2024—The First Time in Four Years That Has Happened – Redfin
• Construction Labor Market Tightens A Little – NAHB
• Home Purchase Sentiment Drops in December amid Rising Mortgage Rates – Realtor.com
• NYC Condo Owners May Bear Costs of Landmark Green Building Law. As deadlines approach for Local Law 97, residents face fee and rent increases. Lawmakers are considering tax exemptions to ease the burden. – Bloomberg

On Australia and New Zealand:

• [Australia] ‘Six months behind’: What property prices will do in 2025 – The Sydney Morning Herald
• [Australia] House prices tipped to rise 3pc in 2025 – Financial Review
• [Australia] Australian Building Approvals Fall, Denting Hopes of Housing Supply Recovery. The total number of dwellings approved fell 3.6% in November – Wall Street Journal
• [Australia] Australia’s housing market ‘buckling’ under widening gap between income and home values, report finds. Housing prices fell by 0.1% in December but dip likely to be ‘shallow and short-lived’, according to CoreLogic – The Guardian
• [Australia] Australia Housing Downturn Likely ‘Short-Lived,’ CoreLogic Says. CoreLogic’s index fell in December after 21 months of growth. Hard to see ‘material growth’ returning to housing values – Bloomberg 
• [New Zealand] How much house prices dropped in 2024 – RNZ
• [New Zealand] New Zealand House Prices Tipped to Show Modest Gains in 2025 – Bloomberg

On other countries:  

• [Canada] Home Sales in Toronto Decrease for First Time in Five Months – Bloomberg
• [Canada] Using new loan data to better understand mortgage holders – Bank of Canada
• [Canada] Canada’s housing markets see a mixed finish to 2024 – RBC
• [Hong Kong] Hong Kong’s attempt to tackle ‘shoebox housing’ runs into trouble – The Guardian
• [Ireland] Revealed: How much Irish house prices are expected to rise by this year despite warnings of ‘painful correction’ in market – Irish Independent
• [Netherlands] Dutch housing construction to pick up again in 2025 – ING
• [United Kingdom] Meet the young families stuck in their starter homes thanks to the UK housing crisis. – The Guardian
• [United Kingdom] Mortgage Brokers Made Rate Hikes More Painful, Says Bank of England. Homeowners tempted into shorter deals, according to research. This left them more exposed when interest rates surged – Bloomberg
• [United Kingdom] UK house prices dip for first time since March, Halifax says – Reuters
• [United Kingdom] Stamp duty changes ‘will motivate first-time buyers’ – BBC

From the World Economic Forum:

“In the past three years, the World Economic Forum’s Centre for the New Economy and Society has accompanied more than 100 companies in their diversity, equity and inclusion journeys and identified, surfaced and highlighted impactful initiatives globally through its Lighthouse Programme.

The Diversity, Equity and Inclusion Lighthouse Insight Report 2025 features the latest cohort of initiatives selected by an independent expert panel for having achieved significant, scalable, quantifiable and sustained impact for one or multiple underrepresented groups.

The Lighthouse repository, comprising the cohorts from 2023 to 2025, currently includes 23 Lighthouses, as well as 20 cases highlighted for their promising and innovative design features, from across industries and geographies.

The objective of the Lighthouse programme is to surface and scale effective initiatives, equipping leaders with the necessary insights to contribute to faster impact across the global business community and policy-making space, and ultimately shaping more inclusive economies for all.”

Continue reading here.

From a paper by Robert Gmeiner:

“Monetary expansion can lead to inflation. Using economy-wide measures, such as the all item CPI or the GDP deflator, these effects can be quantified, but this leaves open the question of which prices are inflating more, and thus whether monetary expansion is more harmful to the rich or poor, depending on their respective consumption patterns. This paper constructs quarterly consumer price indices specific to each income quintile in the United States from 1990 to 2022. Using transfer function autoregressive moving average models with exogenous regressors (ARMAX), significant inflationary effects of monetary expansion CPIs for the lowest income quintile are observed that are independent of changes in the CPI for higher income quintiles. More generally, households that are likely to spend a higher proportion of income on goods with inelastic demand experience higher inflation rates. These effects, which are robust to specification, are caused by monetary expansion from Federal Reserve purchases of government debt, but not other assets.”