John Duca, John Muellbauer, Anthony Murphy, 13 September 2021

Research on house price cycles and their interactions with the economy has burgeoned since the Global Financial Crisis. This column draws five lessons from a recent comprehensive survey. It argues that conventional theories of house price dynamics are misleading. Shifts in credit conditions, together with differences in housing supply response across cities, regions and countries, account for much of the heterogeneity of house price outcomes. Finally, increased demand for space and unprecedented policy interventions together explain the very different house price experience in the pandemic compared with the Global Financial Crisis.

Matteo Benetton, Alessandro Gavazza, Paolo Surico, 09 September 2021

In the aftermath of the 2007–09 financial crisis, central banks have sought to stimulate the economy through new policies aimed at revamping credit and housing markets. This column examines the effects of the Bank of England’s Funding for Lending Scheme, which offers cheap medium-term loans to UK lenders. Mortgage lenders actively price-discriminate across borrowers using two-part tariffs which split the origination fee from the interest rate. This increased after the introduction of the scheme, implying a stronger transmission of monetary policy to credit markets and the real economy.

Yatang Lin, Thomas McDermott, Guy Michaels, 22 April 2021

Despite the higher susceptibility to floods and a growing climate crisis, more than 10% of the world’s population live in low-elevation coastal zones, and that percentage is growing. This column uses a new dataset on the location of housing and flood risk across thousands of kilometres of the US Atlantic and Gulf coasts to present a detailed picture of housing in low-elevation coastal zones, and its relationship to the vulnerability of different locations to flooding and sea level rise. It also explores how sea level rise may reshape cities, and considers implications in terms of rising costs of flooding and taxpayer subsidies, the economic decline of some neighborhoods, and lengthening commutes.

Giancarlo Corsetti, Joao B. Duarte, Samuel Mann, 07 August 2020

A persistent challenge for the ECB has been meeting the various needs and demands of euro area member states. This column provides empirical and quantitative evidence suggesting that the transmission of the ECB’s monetary policy varies significantly across member states. For variables such as those related to housing and labour markets, the dispersion of responses to a monetary shock is twice as large as the average response. The results also suggest that the disruption to market integration brought about by the COVID-19 crisis may create further challenges to conducting monetary policy in the euro area.

Nicolas Woloszko, Orsetta Causa, 31 March 2020

Rising house prices are causing a housing affordability crisis in many countries, but at the same time they are increasing homeowners’ wealth. Governments are faced with the challenge to encourage households to build up housing wealth while also fostering access to good-quality affordable housing. This column shows that, across OECD countries, those countries with higher homeownership rates display much lower wealth inequality, but argues that encouraging homeownership will not help low- and middle-income families accumulate wealth and are likely to conflict with other important policy objectives.

Antoinette Schoar, 11 February 2020

Understanding the origins of the American housing crisis of 2007 has been a challenge for economists and policy makers.

Henrik Yde Andersen, Søren Leth-Petersen, 20 December 2019

House prices and aggregate spending move together, but little is known about the underlying mechanism linking the two. This column introduces a test to discriminate between the housing wealth effect hypothesis, which says that homeowners consider home value changes as windfalls, and the collateral effect hypothesis, which says that a home value increase generates additional collateral that can be borrowed against. Homeowner behaviour in response to home value rises when they are close to their collateral borrowing constraint, suggesting that the collateral effect is important for explaining the link between house prices and spending. 

Andrés Rodríguez-Pose, Michael Storper, 02 October 2019

A dominant view in urban economics suggests that the solution to the housing crisis of major cities is to relax zoning and other planning regulations. This column challenges this position, arguing that there is no clear and uncontroversial evidence that housing regulation is a principal source of differences in home availability or prices across cities and that these issues are more linked to rising inequalities in the geography of employment, wages and skills. Blanket changes in zoning are unlikely to increase affordability for lower-income households in prosperous regions, but would increase gentrification without appreciably decreasing income inequality.

Jean-Charles Bricongne, Alessandro Turrini, 21 August 2019

The increased post-Global Crisis monitoring of house prices still lacks an effective measure for cross-country comparisons. This column outlines the creation of an integrated database covering advanced and emerging economies on the price per square metre of housing. The model shows that price-to-income ratios vary substantially at the extremes, but that the majority economies converge around the median level. Country rankings based on housing prices in euros versus PPP also vary significantly.

Jane Kelly, Julia Le Blanc, Reamonn Lydon, 25 November 2018

Loan-to-value limits and other borrower-based macroprudential measures are now used in two-thirds of advanced economies. This column uses survey data to document changes in credit standards in a cross-section of countries in the run-up to, and aftermath of, the financial crisis. There is clear evidence of laxer credit standards in countries that experienced a real estate boom-bust, and a significant tightening after the bust. The results imply that compared to earlier years, younger and lower-income borrowers have to save for longer before buying.

Jagjit Chadha, 29 October 2018

Jagjit Chadha, Director of the National Institute of Economic and Social Research, describes the main themes explored in the August 2018 issue of the NIESR Economic Review, dedicated to 'Housing and the Economy'.

Alberto Martin, Enrique Moral-Benito, Tom Schmitz, 11 September 2018

Housing bubbles may crowd out credit from other sectors, but they may also have a crowding-in effect by providing collateral to real estate-owning firms or generating attractive assets which banks can securitise and use to increase their credit supply. This column applies data from the Spanish housing bubble to a simple model of a closed economy to show that both effects were present. At first, the crowding-out effect dominated, but then crowding in occurred. This model can be applied to similar positive shocks in other sectors.

Isaiah Hull, Conny Olovsson, Karl Walentin, Andreas Westermark, 23 August 2018

Large movements in house prices can have broad and substantial effects on the macroeconomy. This column uses property-level data to identify the key drivers of house price volatility and decompose this into national, regional, local, and idiosyncratic components. There is substantial cross-sectional variation in house price risk, with higher firm concentration, employment volatility, and manufacturing share of output and employment associated with greater risk. 

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The European Association of Young Economists (EAYE), in collaboration with Leipzig University, is pleased to announce that the 1st EAYE Workshop will take place at Leipzig University on September 10-11, 2018.

Since the Great Recession, research on housing and macroeconomics has become a highly relevant and vibrant research field within macroeconomics. What drives house-price fluctuations? How do pronounced fluctuations in house prices and housing credit affect the real economy? What explains the long run dynamics of house prices? The aim of the workshop is to bring together young economists, as well as a few distinguished senior researchers, that work on these pressing questions and on housing and macroeconomics in general.

We are delighted to announce that two keynote lectures will be given by Alberto Martín (CREI, Universitat Pompeu Fabra, Barcelona GSE, CEPR) and Moritz Schularick (University of Bonn, CEPR).

The submission deadline is June 7, 2018.

David Miles, 23 March 2018

The housing market faces major challenges in both the short and long run in terms of affordability, price variability, ownership structures, financing, and their impacts upon wider macroeconomic stability. This column summarises a conference on lessons for the future of housing, jointly organised by the Brevan Howard Centre for Financial Analysis at Imperial College Business School and CEPR.

Òscar Jordà, Katharina Knoll, Dmitry Kuvshinov, Moritz Schularick, Alan M. Taylor, 02 January 2018

The rate of return on capital plays a pivotal role in shaping current macroeconomic debates. This column presents findings from a new dataset covering returns of major asset classes in the advanced economies over the last 150 years. The data offer new insights on several long-standing puzzles in economics, and uncover new relationships that seem at odds with some fundamental economic tenets. 

Gabriel Ahlfeldt, Daniel McMillen, 04 November 2017

Cities around the world are experiencing unprecedented vertical growth, but there has been little study of the economics of tall buildings. This column summarises novel evidence on the determinants of the urban height profile and the cost of building tall, and derives implications for urban theory and policy. In contrast to standard urban economics models, there is a role for the supply side in determining horizontal land use patterns. Vertical expansion is unlikely to resolve affordability problems in growing cities.

Shang-Jin Wei, 01 November 2017

Could the housing prices in China crash? In this video, Shang-Jin Wei explains whiat are the potential concerns, and how the Chinese government could mitigate them. This video was recorded at the "10 years after the crisis" conference held in London, on 22 September 2017.

Stefania Albanesi, Giacomo De Giorgi, Jaromir Nosal, 03 October 2017

The Global Crisis narrative has suggested that an expansion of subprime credit was the reason for rising mortgage defaults, leading to the large-scale recession in 2007-09. Taking a closer look at the characteristics of subprime credit holders over the period, this column argues that the growth in mortgage defaults did not occur predominantly amongst subprime credit holders. Instead, it was real estate investors that played a critical role in the rise in mortgage debt, specifically among the middle and the top of the credit score distribution.

Mojmir Hampl, Tomas Havranek, 12 September 2017

Seven out of every ten Europeans live in their own homes, yet Europe’s most important inflation measure excludes the costs associated with owner-occupied housing. This column argues that including the costs of home ownership would prove beneficial to the conduct of monetary and macroprudential policy. It would also bring the measure closer to what most people consider inflation to be.

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