The Unassuming Economist

From Josh Barro:

“It’s a pretty good week for my conversation with Adam Ozimek, an economist whose recent work focuses on the intersection between labor markets and housing.

Adam is an evangelist for remote work — perhaps in part because he lives near Lancaster, Pennsylvania, the sort of affordable mid-size city within a couple of hours of very major cities that stands to gain residents from the remote work trend — but he also has arguments that the sharp increase in partial or fully remote work is simply very important for the ways it will change how many parts of the economy operate. Here’s what Adam said:

“I think remote work really is a general purpose technology… It’s more comparable to electrification. It’s more comparable to the invention of the internal combustion engine or automobiles or something like that in the way that it’s going to ripple through everything and it’s going to have these longstanding big impacts. I’m not saying the aggregate economic impact is going to be bigger than or as big as electrification, but it’s that kind of fundamental change.”

There are few places where this effect is bigger than in housing: remote workers want larger homes, they don’t need to live so close to their offices, and they have more flexibility to choose the sort of community they live in. That’s driving all sorts of shifts in relative home prices and changing what needs to be built and where.

I think you’ll find our conversation very interesting. You can find a transcript of the episode and other relevant links at the end of this newsletter.”

Here are some links related to the podcast conversation with Adam:

Click here for a transcript of this episode.

Adam cited this paper by economists Jonathan Dingel and Brett Neiman that says 37% of jobs in America could be done entirely remotely. Here’s a helpful Reuters feature on their work.

Adam also cited economist Nick Bloom’s analysis of worker preference for remote, hybrid, and full-time in-person work.

I referenced this data from key-card company Kastle about the fraction of employees badging in to the office across different metropolitan areas, and this piece from Matt Yglesias on Chicago’s specific troubles.

Conferences

• SI 2022 Real Estate – NBER
• SI 2022 Urban Economics – NBER

On cross-country:

• Eurozone mortgage rate rises threaten house price growth. Borrowing expected to become more expensive in coming months as European Central Bank increases rates – FT
• The global housing boom is running out of steam. Where are prices going to fall most sharply? – The Economist
• Housing Boom and Headline Inflation: Insights from Machine Learning – IMF
• Era of soaring house prices is ending as central banks raise rates. Policies are tightening when major economies are either falling into recession or heading that way – The Guardian
• Will Increasing Housing Supply Reduce Urban Inequality? – International Regional Science Review
• Adapting to flood risk: Evidence from global cities – VoxEU

On the US:    

• The Understated ‘Housing Shortage’ in the United States – Institute of Labor Economics
• The Upside-Down Housing Market. What Happens After Mortgage Rates Hit A 13-Year High? – Apricitas Economics
• Home Sellers Cut Prices as Housing Market Cools. How higher mortgage rates—and frustration—are changing the playbook for sellers – Wall Street Journal
• Why Rising Mortgage Rates Don’t Mean Falling Home Prices – Barron’s
• Should DC’s Empty Office Buildings Get Turned Into Apartments? It’s clear workers will never return in full force. Developers and local officials see an opportunity. – Washingtonian
• A College Town Takes On Exclusionary Zoning. Gainesville, Florida, could be on the verge of eliminating single-family housing requirements. – Bloomberg
• Median vs Repeat Sales Index House Prices – Calculated Risk
• What Is the Future of Public Housing in America’s Cities? – AEI 
• Apartment Rents Begin Tapering Off After Record Growth. Rents are still rising at a historically fast pace but market shows signs of softening – Wall Street Journal
• What’s Ahead for the Housing Market – Goldman Sachs
• Buyers’ Expectations of Housing Availability Improve – NAHB
• A Town’s Housing Crisis Exposes a ‘House of Cards’. In the Idaho resort area of Sun Valley, there are so few housing options that many workers are resorting to garages, campers and tents. – New York Times
• Private Residential Spending Declines in June – NAHB
• The Mix of Home Buyers Is Changing, Leading to Improved Affordability – NAHB
• The Cross-Section of Housing Returns – Cleveland Fed
• New housing market data reveals a stunning shift as these 21 of the top 50 metro areas show price declines for June – AEI
• Banks Report Unchanged Home Lending Standards – NAHB

On China:

• ‘Financial monsters’: China’s bad banks complicate property crisis. Distressed asset management companies highlight the challenge Beijing faces in mobilising rescue options – FT
• Sweeping Mortgage Boycott Changes the Face of Dissent in China. Angry homebuyers have launched one of the most effective protests the country has ever seen. – Bloomberg
• China Home Sales Plunge in July, as Mortgage Revolt Deters Buyers. Sales fell on the year and from the previous month, ending a budding recovery – Wall Street Journal
• China’s Home Sales Slump Further During Mortgage Boycotts. Top 100 developers saw sales tumble almost 40% in July. Industry confidence remains at a low level, CRIC says – Bloomberg
• China Banks May Face $350 Billion in Losses From Property Crisis. Mortgage boycotts and slowing growth are rattling authorities. Pressure seen growing on China’s $56 trillion banking system – Bloomberg  
• How China can overcome its property crisis – OMFIF
• Chinese banks can withstand mortgage boycott if property prices hold – S&P Global

On other countries:  

• [Australia] From boom to gloom, Australia’s red hot property market hits reverse – Reuters
• [Australia] Will the house price collapse be different this time? A puzzling feature of the latest house price slump is that prices for top-end properties, which are usually most vulnerable to housing market corrections, are showing surprising resilience. – Financial Review
• [Austria] Austria Real Estate Market Analysis 2022 – Global Property Guide
• [Hong Kong] ‘Historic’ Hong Kong home prices: worst yet to come, with up to 30 per cent slump a possibility as market enters decline. – South China Morning Post
• [Hong Kong] Will sharp rises in interest rates diminish Hong Kong’s love affair with property? – South China Morning Post
• [New Zealand] New Zealand House Prices Sink Most Since Global Financial Crisis. CoreLogic data show biggest three-month decline since 2008. Buyer demand curbed by soaring mortgage interest rates – Bloomberg
• [Poland] Poland’s mortgage holiday for households threatens bank profits. Lenders warn moratorium will hit earnings and could result in legal action against government – FT
• [South Korea] S. Korea’s home prices to fall up to 2.8% with 100 bp rate hike – c.bank report – Reuters
• [United Kingdom] UK’s Mortgage Market Feels the Heat From Rising Rates. NatWest reports slower mortgage growth in second quarter. Lloyds predicts house prices will finally fall in coming year – Bloomberg
• [United Kingdom] The Guardian view on housing costs: a grave and growing injustice. Levelling up will be impossible as long as rents and house prices are allowed to keep on climbing – The Guardian
• [United Kingdom] Interest rates are rising – so why are mortgage rules being scrapped? Analysis: Bank ruling that borrowers don’t have to show they can afford steep repayment hikes raises questions over how to curb excessive borrowing – The Guardian
• [United Kingdom] Who took out mortgage payment holidays during the pandemic? – Bank of England
• [United Kingdom] UK house prices rise at 11% annual rate despite cost of living crisis. Strong labour market and limited housing stock push up prices as mortgage transactions cool – FT

From RICS:

” – Construction Activity Index stalls in Europe and APAC, but remains a little more resilient elsewhere
– Overwhelming majority of respondents still report material costs and shortages to be impediments
– Global workloads still anticipated to rise across all sectors, albeit expectations are being scaled back”

From an article in Tribune by Murtaza Syed:

“Mahbub ul Haq taught me all I know about economics that is ultimately worth knowing. In a nation cruelly short of heroes, Mahbub, my first boss, was a shining light. As Chief Economist of the Planning Commission in the 1960s, he punctured the celebrated high growth rates of the Ayub era. He showed an enraptured domestic audience that state resources had been misused to create powerful monopolies that stifled entrepreneurship and only survived because of subsidies. As a result, the benefits of this growth had been hijacked by a handful of families, who controlled the majority of the country’s land and industrial wealth.

Later, as an adviser to World Bank President Robert McNamara, Mahbub launched a frontal assault on the false god of economic growth and its cathedral on earth, the free play of market forces. He pointed out that across the world, too, growth often fails to translate into better lives for ordinary people. Moreover, he argued that the mythical forces of demand and supply do not work when people are shackled by low purchasing power or a handful has monopoly power. To address this, he saw a vital role for the state in kick-starting the process of growth and ensuring it was equitably shared. Through these insights, he pioneered the paradigm of human development, and with it the vastly influential human development index which looks beyond GDP to capture other vital dimensions of human well-being like decent education, good health, political freedom, cultural identity, personal security, community participation, and environmental security.

Mahbub was a man ahead of his time. His eloquence reverberated on the world stage. He emerged as the spokesperson of the developing world, incessantly appealing to the conscience of richer nations. He is missed every day. Today, a quarter century after his untimely passing, his beloved homeland remains mired in desperate poverty and massive inequality. While most of our neighbours have taken off, we remain stuck at a per capita income of a little over $1,000 and every third person lives on less than $3 a day. Almost half our people are illiterate and less than a quarter of our women work.

Much like in Mahbub’s time, the fault still lies in the engines of our growth and the fickleness of our public policies. Our politicians are obsessed with growth at any cost but pull the wrong levers to achieve it time and time again: lazy, short-term stimulus that inevitably leads to painful busts as opposed to the long and winding road of structural reforms that unleashes prolonged growth through higher productivity and innovation. Short-termism associated with political cycles and an unfortunate lack of preparation and imagination among the economic teams of political parties is to blame.

Pakistan today is a country that can barely grow above 4-5% without finding itself hobbled by a current account deficit it cannot finance. Its growth model is too reliant on consumption, which accounts for a staggering 95% of overall output, while investment and exports make up just 15 and 10%, respectively. As a result, the country runs a perennial current account deficit, in stark contrast to the surpluses generated by the high-saving Asian tigers of the 1970s and 1980s.’

Continue reading here.

From the IMF’s latest report on Italy: