The Unassuming Economist

From a paper by Cars Hommes, and Sebastian Poledna:

“This study investigates the potential of agent-based modelling to forecast economic crises, addressing the failure of standard macroeconomic models to predict the 2008 financial crisis and capture crisis dynamics. While dynamic stochastic general equilibrium models have incorporated financial frictions, solving them typically requires linearisation around steady states, which suppresses the non-linear feedback loops through which crises emerge. Agent-based models avoid this limitation by numerically simulating heterogeneous agents, preserving non-linear dynamics without approximation. We develop such an agent-based model for the euro area and show that out-of-sample forecasts outperform benchmarks. We further demonstrate that the model can forecast economic crises without exogenous shocks and accurately reproduce crisis dynamics. The model endogenously predicts the onset of the Great Recession, explains the persistence of the sovereign debt crisis, and reproduces the sharp contraction and swift recovery of the COVID-19 recession. The findings suggest that preserving non-linear feedback loops is essential for crisis prediction.”

From a paper by Tayebeh Chaman, Ali Asghar Salem, Abbas Shakeri Hossein Abad, and Teymour Mohammadi:

“The inflation targeting regime, by emphasizing transparency, accountability, and anchoring inflation expectations, leads to improved inflation control, a reduction in economic instability, and the creation of a favorable environment for economic growth, productive investment, and lower income inequality. Therefore, the objective of the present study is to investigate the role of inflation targeting in income distribution across a sample of 39 countries, including 7 inflation-targeting and 32 non-inflation-targeting countries, using a difference-in-differences approach over the period 1995–2023. The findings indicate that the implementation of an inflation-targeting regime has a negative and statistically significant effect on the Gini coefficient, thereby reducing income inequality in the treatment-group countries relative to the control group. In addition, per capita GDP, the share of the agricultural sector in GDP, and foreign direct investment have negative and significant effects on income inequality, while the trade share of GDP has a positive and significant effect. Overall, the results suggest that adopting an inflation-targeting regime in countries experiencing high inflation and ineffective monetary policy frameworks can mitigate the adverse effects of inflation on income distribution. Thus, it is recommended that central banks in such countries implement an inflation-targeting framework to enhance macroeconomic stability, promote investment, and reduce income inequality.”

Working papers and conferences:

• The Geographic and Economic Implications of Working from Home – Philadelphia Fed
• The Risks and Rewards of Homeownership – NBER
• How are Prices Determined in the Airbnb Market? – SSRN
• Spatial Distribution of Housing Liquidity – SSRN
• Monetary Policy Shocks and Local Housing Markets – SSRN

On China:

• China’s property slump deepens—and threatens more than the housing sector – Atlantic Council
• At World’s Busiest Port, China’s Unbalanced Economy Comes Into View. The shipping traffic and factories never stop in China’s port city of Ningbo, but the local housing market has crashed and nearby restaurants sit empty. – New York Times

On Australia and New Zealand:

• [New Zealand] Biggest bank downgrades house price forecast – RNZ

On other countries:  

• [Canada] Economist sees subdued 2026 in the housing market as condos drag – Globe and Mail
• [Croatia] Addressing housing challenges in Croatia: an OECD perspective – Institute of Public Finance
• [Ireland] The Irish Times view on house price growth: slowing, but not fast enough. The challenge for the Coalition in 2026 is to show they have momentum in infrastructure and housing delivery – The Irish Times
• [Korea] South Korea to Fast-Track Housing Supply in Seoul to Cool Prices – Bloomberg
• [Malaysia] Malaysia’s Residential Property Market Analysis 2026 – Global Property Guide
• [Philippines] Philippines’ Residential Property Market Analysis 2026 – Global Property Guide
• [United Kingdom] What’s A Major Tax Shake-Up Is Changing the Way Londoners Buy Homes. Punishing taxes and rising fees are pushing buyers to abandon flats for houses—and reshaping the city’s housing market – Wall Street Journal
• [United Kingdom] Rent in London’s Poshest Postcodes Falls for the First Time in Four Years – Bloomberg
• [United Arab Emirates] United Arab Emirates’ Residential Property Market Analysis 2026 – Global Property Guide
• [United Arab Emirates] U.K. Property Market Recovers Post-Budget Jitters But Price Growth Still Slow. House prices rose 1.2% last year but were below the 1.9% increase in 2024, according to a Zoopla report – Wall Street Journal
• [United Kingdom] ‘Absurd’: decent homes standard for England’s private renters will not be enforced until 2035. Campaigners say government is letting landlords ‘drag their feet’ and ‘denying renters the most basic standards’ – The Guardian
• [United Kingdom] UK’s Zoopla says house buyer demand has risen since November budget – Reuters
• [United Kingdom] U.K. Property Market Recovers Post-Budget Jitters But Price Growth Still Slow. House prices rose 1.2% last year but were below the 1.9% increase in 2024, according to a Zoopla report – Wall Street Journal  

On prices, rent, and mortgage:    

• Case-Shiller: National House Price Index Up 1.4% year-over-year in November
• FHFA House Prices up 1.9% YoY in November – Calculated Risk
• Inflation Adjusted House Prices 2.4% Below 2022 Peak. Price-to-rent index is 9.6% below 2022 peak – Calculated Risk
• Home Prices Rose to Record Highs in 2025 as Affordability Challenge Looms – ATTOM
• Back to the Suburbs: Bay Area Edition. Suburban home prices are rising faster than urban ones – Home Economics
• Is your backyard heating up in 2026? Check Zillow’s hottest markets list. – Zillow
• Zillow’s Best Markets for Home Buyers in 2026: Where Buyers Have Leverage and Upside – Zillow
• The Winter 2026 Wall Street Journal/Realtor.com Housing Market Ranking – Realtor.com
• Mortgage Applications Today: Record-Low Mortgage Rates Spark Home Lending and Refinancing Surge – Realtor.com 
• NMHC on Apartments: “Lower rent growth and higher vacancies” in Q4. Leading indicator for Rents and Apartment Vacancies Negative in Q4 – Calculated Risk
• Trump’s mortgage-backed bond purchases not moving needle on housing costs – Reuters
• Homebuying and Selling Activity Show Signs of Life Amid Lower Mortgage Rates – Redfin
• Buying a House Has Become Less Affordable. A 50-Year Mortgage Is Not the Answer. – AEI
• US single-family home prices jump in November, FHFA says – Reuters

On sales, permits, starts, and supply:    

• Will Banning Corporate Homebuyers Make Housing More Affordable? The Trump administration has moved to restrict institutional investors’ home purchases and proposed allowing buyers to draw on retirement savings for down payments. We asked Professor Cameron LaPoint, who studies housing finance, whether these policies are likely to make housing more affordable—or to push prices higher. – Yale Insights 
• These Developers Stand to Win in Trump’s Housing-Investor Crackdown. The build-to-rent business looks poised to take off after Trump exempted this industry from his regulations on large investors – Wall Street Journal
• December 2025 Monthly Housing Market Trends Report – Realtor.com
• Pool Permitting Falls Lower In 2025 – NAHB
• 4th Look at Local Housing Markets in December – Calculated Risk
• Remodeling Growth Set to Downshift in Late 2026 – Joint Center for Housing Studies 

On other developments:    

• How Remaking the Neighborhood Could Boost Poor Kids’ Futures. A 1990s initiative to replace housing projects with mixed-income developments gave children an economic lift as adults, new research finds – Wall Street Journal
• Population Growth Slows to a Crawl. Less international migration, less domestic migration, fewer births, and more deaths – Home Economics
• What Explains Low Millennial Home Ownership? Lifestyle and affordability – Home Economics
• The Price of Endless Summer. California is experiencing large migration outflows. The high cost of housing is the main driver. – Home Economics
• Is this a Weird Housing Market? It sure feels like one – Home Economics
• The Hidden Risk to the Housing Market – New York Times
• There’s a practical way to lower housing prices. Democrats should seize it. Affordability is a goal, not a policy. – Washington Post 
• Event: Creating high-opportunity neighborhoods: Lessons from HOPE VI on February 2 – Brookings
• December 2025 Luxury Housing Report: Where the Gap Between Median and Luxury is the Widest – Realtor.com
• Here’s How the Housing Market Has Changed Over the Past 10 Years – Realtor.com
• Addressing the US Affordability Crisis – Signal Versus Reality. The Trump administration has announced a range of measures aimed at addressing affordability in the run up to this year’s midterm elections including housing, healthcare and consumer finances. In our view, these initiatives are unlikely to materially alter the near-term inflation outlook – Nomura
• Who Should Shoulder the Tax Burden in a Resort Town? There’s no easy answer as Massachusetts communities contemplate changing taxes for part-time residents. – New York Times
• How Trump Could Actually Fix Housing Market. Washington needs to unlock capital through deregulation. – Wall Street Journal
• Portland’s housing crisis squeezes middle-income buyers – Axios
• Trump Wants to Fix the Broken US Housing Market. Can He Succeed? – Bloomberg
• Something Weird Is Happening in the Housing Market. After the pandemic, many younger Americans were encouraged to buy housing in “starter cities.” But now the homes are losing value, and property taxes are soaring, pitching the housing market into crisis. – Jacobin  

January 28 at 12 pm
Zoom link: https://zoom.us/j/98397311321?pwd=K5i4ya1afU1JbJDJ87YRnpDgP7wjyG.1

 Last year, the U.S. economy ended up with about 2 % income growth and about 2½ % inflation. What are the expectations for this year? Should we expect (1) resilience (broadly similar performance to 2025), (2) stagflation (slower income growth, higher inflation – say, due the impact of tariffs) or (3) recession (a decline in income, say due to the bursting of an AI bubble)?

Hear the views of:

• Jason Furman, Harvard professor and former CEA chair;
• Torsten Slok, chief economist, Apollo Management;
• Peter Coy, former Businessweek and New York Times columnist;
• Betsey Stevenson, Michigan professor and former CEA member and chief economist, Department of Labor.

All are welcome to attend. Zoom link given above.