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You are looking at 1 - 10 of 45 items for :

  • Type: Journal Issue x
  • Finance and accounting x
  • IMF Working Papers x
  • Macroeconomics x
  • Economic Development: Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure x
  • Financial Economics x
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Cover IMF Working Papers
The Housing Supply Channel of Monetary Policy
Bruno Albuquerque, Martin Iseringhausen, and Frederic Opitz
We study the role of regional housing markets in the transmission of US monetary policy. Using a FAVAR model over 1999q1–2019q4, we find sizeable heterogeneity in the responses of US states to a contractionary monetary policy shock. Part of this regional variation is due to differences in housing supply elasticities, household debt overhang, and housing wealth (volatility). Our analysis indicates that house prices and consumption respond more in supply-inelastic states and in states with large household debt imbalances, where negative housing wealth effects bite more strongly and borrowing constraints become more binding. Moreover, financial stability risks increase sharply in these areas as mortgage delinquencies and foreclosures surge, worsening banks’ balance sheets. Finally, monetary policy may have a stronger effect on housing tenure decisions in supply-inelastic states, where the homeownership rate and price-to-rent ratios decline by more. Our findings stress the importance of regional housing supply conditions in assessing the macrofinancial effects of rising interest rates.
Keywords:
Credit conditions; FAVAR; house prices; monetary policy; regional data; supply elasticities; wealth effects bite; supply condition; housing supply channel; contractionary monetary policy shock; housing wealth; Housing; Housing prices; Consumption; Supply elasticity; Mortgages; Europe; Global
Cover IMF Working Papers
Housing Affordability: A New Dataset
Nina Biljanovska, Mr. Chenxu Fu, and Ms. Deniz O Igan
The rapid increase in house prices in the past few years, including during the COVID-19 pandemic, raises concerns about housing affordability. The price-to-income ratio is a widely-used indicator of affordability, but does not take into account important factors such as the cost of financing. The aim of this paper is to construct a measure of housing affordability that takes these factors into account for a large set of countries and long period of time. The resulting dataset covers an unbalanced panel of 40 countries over the period from 1970Q1 to 2021Q4. For each country, the index measures the extent to which a median-income household can qualify for a mortgage loan to purchase an average-priced home. To gauge the performance of the constructed indices, we compare them to other readily-available mesures of affordability and examine the evolution of the indices over time to understand the relevant drivers, including in a regression analysis to assess the extent to which government housing programs could contribute to improving affordability.
Keywords:
housing affordability; real estate markets; government housing program; affordability index; household income; indices in selected country; Housing; Housing prices; Mortgages; Income; Global; Eastern Europe; Baltics
Cover IMF Working Papers
European Housing Markets at a Turning Point – Risks, Household and Bank Vulnerabilities, and Policy Options
Ms. Laura Valderrama, Patrik Gorse, Ms. Marina Marinkov, and Petia Topalova
European housing markets are at a turning point as the cost-of-living crisis has eroded real incomes and the surge in interest rates has made borrowers more vulnerable to financial distress. This paper aims to (i) shed light on the risks in European housing markets, (ii) quantify household vulnerabilties, (iii) assess banking sector implications and (iv) examine policies’ effectiveness using simulations based on microdata from the Household Finance and Consumption Survey (HFCS) and EU statistics on income and living conditions (EU-SILC). Under the baseline IMF macroeconomic forecast, the share of households that could struggle to meet basic expenses could rise by 10 pps reaching a third of all households by end 2023. Under an adverse scenario, 45 percent of households could be financially stretched, representing over 40 percent of mortgage debt and 45 percent of consumer debt. The impact on the banking sector seems contained under the baseline forecast, though there are pockets of vulnerability. A 20 percent house price correction could deplete CET1 capital by 100-300 basis points. Fiscal measures, such as subsidies to the bottom income tercile, could save 7 percent of households from financial distress at an estimated cost of 0.8 percent of GDP.
Keywords:
Housing markets; overvaluation; affordability; household vulnerability; tenure status; income distribution; consumption; financial stability; targeted support; macroprudential policy.; EU banking sector; banking sector implication; housing market correction; house price correction; bank capital; Mortgages; Housing prices; Income; Housing; Europe; Eastern Europe
Cover IMF Working Papers
Bubble Detective: City-Level Analysis of House Price Cycles
Mr. Serhan Cevik and Sadhna Naik
This paper investigates house price dynamics at high frequency using city-level observations during the period 1994-2022 in Lithuania. We employ multiple time series-based econometric procedures to examine whether real house prices and house price-to-rent ratios exhibit explosive behavior. According to these recursive right-tailed test results, we reject the null hypothesis of no-bubble and find evidence for long and multiple periods of explosive behavior in the real estate market in all major cities during the sample period. While the size of bubbles varies across cities, especially when we use the house price-to-rent ratio, there is clearly a similar boom-bust pattern. Large house price corrections can in turn have adverse effects on economic performance and financial stability, as experienced during the global financial crisis and other episodes in history.
Keywords:
House prices; bubbles; recursive unit root test; city-level; Lithuania; house price correction; house price cycle; test result; econometric procedure; housing boom; Housing prices; Asset bubbles; Real estate prices; Asset prices; Housing; Global
Cover IMF Working Papers
The Pricing-Out Phenomenon in the U.S. Housing Market
Francesco Beraldi and Mr. Yunhui Zhao
The COVID-19 pandemic further extended the multi-year housing boom in advanced economies and emerging markets alike against massive monetary easing during the pandemic. In this paper, we analyze the pricing-out phenomenon in the U.S. residential housing market due to higher house prices associated with monetary easing. We first set up a stylized general equilibrium model and show that although monetary easing decreases the mortgage payment burden, it would raise house prices, lower housing affordability for first-time homebuyers, and increase housing wealth inequality between first-time and repeat homebuyers. We then use the U.S. household-level data to quantify the effect of the house price change on housing affordability relative to that of the interest rate change. We find evidence of the pricing-out effect for all homebuyers; moreover, we find that the pricing-out effect is stronger for first-time homebuyers than for repeat homebuyers. The paper highlights the importance of accounting for general equilibrium effects and distributional implications of monetary policy while assessing housing affordability. It also calls for complementing monetary easing with well-targeted policy measures that can boost housing affordability, particularly for first-time and lower-income households. Such measures are also needed during aggressive monetary tightening, given that the fall in house prices may be insufficient or too slow to fully offset the immediate adverse impact of higher rates on housing affordability.
Keywords:
Pricing-Out, U.S. Housing Market, Housing Affordability, Distributional Effects, Monetary Policy; housing affordability; pricing-out effect; pricing-out phenomenon; first-time homebuyer; equilibrium effect; Housing prices; Housing; Income; Mortgages; Inflation; Asia and Pacific
Cover IMF Working Papers
A Tale of Tier 3 Cities
Mr. Kenneth Rogoff and Yuanchen Yang
This paper provides new estimates of the housing stock, construction rates and price developments by city tier in China in order to understand where imbalances might be concentrated, and the implications of any significant contraction. We also update estimates of the size of China’s rapidly evolving real estate sector through 2021, allowing one to look at the initial impact of COVID-19, as well as extending the analysis to incorporate urban-expansion related infrastructure construction. We argue that China overall faces imbalances between supply and demand for housing stock, but the problem is significantly deeper outside tier 1 cities.
Keywords:
China; Real Estate; Macro Economy; sector vulnerability; housing stock estimation; infrastructure construction; infrastructure investment; construction rate; Housing; Stocks; Infrastructure; Housing prices; Depreciation
Cover IMF Working Papers
Real Estate in the Netherlands: A Taxonomy of Risks and Policy Challenges
André Geis and Ms. Oana Luca
Soaring real estate prices and valuations despite the economic downturn brought by the pandemic have focussed the attention of Dutch policymakers on potential macro-financial and socio-economic implications. In this context, our paper reviews the salient features of Dutch commercial and residential real estate markets with an eye to identify pertinent risks and challenges. While we find that the Dutch authorities have made considerable strides to strengthen real estate-related policies in recent years, some, and partly long-standing, issues remain, requiring additional efforts to bolster financial stability, address housing supply shortages and manage secular changes affecting property markets.
Keywords:
address housing supply shortage; property market; B. CRE market characteristic; market development; CRE investment cycle; Housing; Mortgages; Mutual funds; Real estate prices; COVID-19; Global