The Unassuming Economist

From a paper by Surjit Bhalla, Karan Bhasin, and Prakash Loungani:

“We examine the impact of formal adoption of inflation targeting (IT) on inflation, growth and anchoring of inflation expectations in advanced economies and emerging markets and developing economies (EMDEs). Our paper reports several findings relevant to assessing the success of IT regimes. We find that while the early adopters of IT (pre-2000) all saw declines in inflation rates following adoption, IT adopters since then have enjoyed such success in only about half the cases. Since there is not much difference, on average, between IT and non-IT countries in mean inflation, inflation volatility and the extent of inflation anchoring, it is not easy to sort out what role IT has played in ensuring good outcomes; in particular, we cannot rule out the possibility that the success of IT may be due to ‘regression to the mean’. Our country-level analysis—using the Synthetic Control Method (SCM) to compare outcomes in IT countries to a synthetic cohort—shows that IT adoption delivers significant inflation gains in about a third of the cases. At the same time, we also find limited support for the concern that adoption of IT systematically leads to poorer growth outcomes. At a time when central banks are struggling to keep inflation in check, our results suggest that the belief that IT adoption will be sufficient to achieve this goal cannot be taken for granted.”

From a paper by Guilherme Klein Martins:

“This paper provides evidence that austerity shocks have long-run negative effects on GDP. Our baseline results show that contractionary fiscal shocks larger than 3% of GDP generate a negative effect of more than 5.5% on GDP even after 15 years. Evidence is also found linking austerity to smaller capital stock and total hours worked in the long-run. The results are robust to different fiscal shock datasets, the exclusion of particular shocks, and the use of cleaner controls. The paper also engages with the emerging discussion regarding fiscal multipliers heterogeneity, presenting evidence that the effects of exogenous fiscal measures are nonlinear on the shock size. The results also contribute to the broader discussion on the long-run effects of demand by suggesting that such shocks might permanently affect the economy.”

On cross-country:

• A long-term view of house prices – World Economic Forum
• The European housing shortage is fueling populism’s ascent. Housing markets in Europe’s magnet cities are buckling as demand outpaces supply. – Washington Post

Working papers and conferences:

• Quantifying ‘Mortgage Rate Lock’ for US Homeowners – NBER
• The role of cities in economic development – VoxDev
• The Sensitivity of Bank Performance to Local Housing Prices – Evidence from Diversified and Local Banks – SSRN

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

• Buying like it’s 2021: Nearly half of recent buyers have a mortgage rate below 5% – Zillow
• Who Paid More in Rent: Gen Z or Millennials? An analysis of Census Bureau data found that while Generation Z is definitely rent burdened, millennials may have had it worse. – New York Times
• Home Builders Usually Love Cheap Mortgages—Maybe Not This Time. Sales of newly built homes have been on a tear. Soon, builders will face stiffer competition for buyers. – Wall Street Journal
• 10 Things to Know About the Mortgage and Housing Markets Right Now – October 2024 – CoreLogic
• Squeezed Homebuilders Are Bad News for the Housing Market. A pullback in construction activity is the last thing we need. – Bloomberg 
• The surprising barrier that keeps us from building the housing we need. Sure, there’s too much red tape, but there is another reason building anything is so expensive: the construction industry’s “awful” productivity. – MIT
• Inflation Adjusted House Prices 1.5% Below 2022 Peak. Price-to-rent index is 8.1% below 2022 peak – Calculated Risk
• Surging Mortgage Rates Threaten US Housing Market Momentum. Buyers have been whipsawed by borrowing costs in recent weeks. Volatility threatens to weigh on demand from house hunters – Bloomberg 
• Private Residential Construction Spending Rises in September – NAHB
• ICE Mortgage Monitor: “Annual home price growth cooled for the seventh consecutive month” – Calculated Risk
• Residential Building Wages Grow at Unprecedented Rate – NAHB
• October 2024 Monthly Housing Market Trends Report – Realtor.com
• America’s Empty Apartments Are Finally Starting to Fill Up. If that demand is sustained, landlords likely will have more pricing power starting sometime next year – Wall Street Journal
• Swing States’ Home Values Outweigh 2024 Election Uncertainty – CoreLogic  
• Deregulation, Not Rent Control, Is the Right Response to the Housing Crisis – Cato
• In Q2, almost 20% of Units Started Built-for-Rent were Single Family. Quarterly Housing Starts and Completions by Purpose and Design – Calculated Risk
• US Home Price Insights – November 2024 – CoreLogic
• Mortgage Activity Declines in October as Mortgage Rates Increase – NAHB
• Multifamily Developer Sentiment Showed Mixed Results in Third Quarter – NAHB
• 1st Look at Local Housing Markets in October. First Year-over-year Sales Gain Since August 2021 – Calculated Risk

On the US—other developments:    

• Donald Trump Will Return to the White House: What His Presidency Means for the Housing Market – Realtor.com
• The Housing Election That Won’t Fix the Housing Crisis. Victory in the fight for cheaper housing, a more liberal land-use regime, and greater property rights won’t come from the White House. – Reason
• How Harris and Trump Want to Solve the Housing Crisis. The U.S. is in an affordable housing crisis and the solution seems simple: build more houses. WSJ takes a look at the process of building a home, where it gets expensive and where Kamala Harris’s and Donald Trump’s housing plans would intervene. Photo: Madeline Marshall – Wall Street Journal
• Can a National Housing Policy Solve the Affordability Crisis in Cities? – Harvard
• Government Policies Are Making it More Expensive to Turn Land Into Homes – Bloomberg
• A Letter to the Nation’s New Leaders: Right Now, the American Dream of Homeownership Is in Crisis – Realtor.com
• The Silly Rule That’s Helping Keep Housing Costs High – New York Times
• The 5 Housing Markets To Watch in 2025—Especially If You’re an Investor – Realtor.com  
• Zillow Is Caught in a Housing Slowdown. It Still Beat Earnings Estimates. – Barron’s

On China:

• Home Prices Declining in China – Apollo
• China’s Residential Property Market Analysis 2024 – Global Property Guide
• Six cities, one question: is China’s property market turning a corner? From Shanghai to Guangzhou and Beijing to Foshan, buyers and agents voice concerns ahead of next phase of stimulus – FT

On Australia and New Zealand:

• [Australia] Australian home prices hit new high during spring rush but Sydney records small slip. Perth, Adelaide and Brisbane remain the strongest capital city property markets, with prices up 20.58%, 14.91% and 12.51% over the past year – The Guardian
• [Australia] Sydney House Prices Drop for the First Time in Almost Two Years – Bloomberg
• [Australia] Australian House Prices Rise 0.3% in October. Prices post their 21st monthly rise in succession in October, reflecting weak supply of homes and surging immigration – Wall Street Journal
• [Australia] FET #45: Why the Aussie construction sector is defying predictions with Rob Sobyra – Fresh Economic Thinking
• [Australia] Building more houses will build a better society – Grattan Institute
• [New Zealand] New Zealand Housing Market Bogged Down by Flood of Listings. Prices seen recovering in 2025 if summer sales clear backlog. ‘Prices may bounce along the bottom for a few months yet’: ANZ – Bloomberg

On other countries:  

• [Canada] Toronto Home Sales Climb 14% in October, Boosted by Rate Cuts. Benchmark measure of prices rose for the first time since July. Lower borrowing costs are helping affordability, Pearce says – Bloomberg
• [Canada] Finding balance in the mortgage market – Bank of Canada
• [Canada] Canada’s mortgage market—A question of balance – Bank of Canada
• [Canada] Mortgage stress tests and household financial resilience under monetary policy tightening – Bank of Canada
• [Canada] Bank of Canada Warns of ‘Tinkering’ With Mortgage Rules – Bloomberg
• [Hong Kong] Hong Kong’s Buy-Rent Gap Set to Narrow as Home Prices Bottom Out. Prices are at an eight-year low with rents near a record high. Markets are unlikely to fully converge as oversupply persists – Bloomberg
• [Norway] Norway Housing Prices Extend Gains, Backing Central Bank’s View – Bloomberg
• [Sweden] Swedish Housing Prices Hold Up Better Than Usual in October – Bloomberg
• [Sweden] Swedish Report Backs Government Push to Loosen Mortgage Rules – Bloomberg
• [United Kingdom] UK Housebuilding Recovery Stalled Before Budget, PMI Shows – Bloomberg

From a paper by Jelena Momčilović and Mirjana Miletić:

“In this paper we showed how labour market factors are included in the macroeconomic model which the National Bank of Serbia uses for the medium-term inflation projection, thus enabling an insight into labour market trends, as well as an analysis of the link with other macroeconomic indicators, notably their effect on inflation. The estimates obtained by applying the Kalman filter indicate that NAIRU is still below the unemployment rate, suggesting a positive unemployment gap and showing that the labour market in Serbia is not exerting any major pressures on inflation. The paper also presents the results of testing the relevance of the hysteresis effect in the unemployment rate for Serbia. The hysteresis effect was confirmed by applying the unit root test and estimating the statistical significance of the stochastic trend in the NAIRU series.”

From a paper by François de Soyres, Simon Fuchs, Illenin O. Kondo, and Helene Maghin:

“We show how local worker flow adjustment margins yield a theory-consistent sufficient statistic
approximating the welfare effects of local shocks. Furthermore, we isolate a city’s insurance value
as this approximation’s second-order term. Leveraging rich labor flows data across occupations,
industries, and cities in France, we estimate spatial and non-spatial flows responses to local labor
demand shocks. Less economically diverse French cities experience deeper contractions in gross
outflows following negative shocks. In contrast, more economic concentration begets a modestly
larger increase in gross worker flows following positive shocks. Altogether, we uncover a sizable
welfare insurance gains from local economic diversity.”