Bruno Albuquerque, Martin Iseringhausen, Frederic Opitz, 23 June 2020

The COVID-19 shock has ended the eight-year long US housing market expansion. At the same time, the Federal Reserve and the US Government have deployed significant resources to help weather the ongoing crisis. But the trajectory of the post-COVID-19 recovery remains uncertain. Using a time-varying parameter model, this column suggests that the next US housing recovery may exhibit similar features to the 2012-19 expansion: a sluggish response of housebuilding to rising demand, but a strong response of house prices.

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.

Knut Aastveit, Bruno Albuquerque, André Kallåk Anundsen, 25 February 2020

Housing supply elasticities can help explain why house prices differ across locations. This column uses a rich dataset and a novel identification method to show that US housing supply has become less elastic since the Global Crisis, with bigger declines in places where land-use regulation has tightened most and in areas that had larger price declines during the crisis. This new lower elasticity means US house prices should be more sensitive to changes in demand than before the crisis.

Zhenyu Gao, Michael Sockin, Wei Xiong, 26 January 2020

Housing speculation became a national phenomenon in the low interest rate environment of the US during the mid-2000s. This column argues that speculation, which was largely independent of the credit expansion to subprime households, contributed significantly to US housing and economic cycles in the 2000s. It led not only to greater price appreciation, economic expansions, and housing construction during the boom in 2004–2006, but also to more severe economic downturns during the subsequent bust in 2007–2009. 

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.

Steven Davis, John Haltiwanger, 05 May 2019

Young firms live a financially precarious life, often dependent on self-funding tied to the value of the business owners’ homes. This column uses data from the US to show that housing market fluctuations play a major role in driving medium-term changes in young firm employment shares. As young firms hire a disproportionate number of younger and less-educated workers, these groups are disproportionately affected by house price fluctuations. 

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'.

Stephen Cecchetti, Kim Schoenholtz, 23 October 2018

James Cloyne, Kilian Huber, Ethan Ilzetzki, Henrik Kleven, 31 August 2018

House prices are strongly correlated with borrowing, but little is known about which one is causing the other. The column uses UK house price data between 2005 and 2015, and also exploits unusual features of the UK mortgage market, to show that a 10% rise in house prices led to a 2% rise in the amount of equity extracted. This is mostly because higher house prices could be used as collateral.

Atif Mian, Amir Sufi, 19 August 2018

Charles P. Kindleberger wrote that “asset price bubbles depend on the growth in credit”. This column looks at the acceleration of the US private label mortgage securitisation market in the US in the late summer of 2003, which disproportionately reduced the cost of financing by lenders that did not traditionally rely on deposit financing for mortgage lending. The sharp rise in lending in zip codes with greater exposure to such lenders generated a boom and bust in house prices. Easier credit also appears to have been a crucial ingredient in explaining bubble cities that experienced both house price and construction booms.

Filipa Sá, 15 May 2018

There is growing concern among households and policymakers alike that house prices in England and Wales are being driven up by foreign buyers making investment purchases. Filipa Sá examines the link between foreign investment and house prices, using local authority data over a span of 15 years. This video was recorded at the 2018 RES annual conference.

Jonathan Portes, 06 April 2018

Much public and policy concern has focused on the distributional impacts of immigration – in particular, potential negative impacts on employment and wages for low-skilled workers. This column summarises evidence and draws conclusions from the now considerable literature on the impact of migration to the UK on the economy and labour market, including the potential economic impacts of Brexit-induced reductions in migration.

Irina Stanga, Razvan Vlahu, Jakob de Haan, 15 March 2018

Mortgage delinquency triggered the liquidity crisis that turned into the Global Crisis. Ten years on, mortgage lending still accounts for a large share of both household debt and banks’ assets. This column examines the incidence of mortgage arrears using a dataset for 26 countries from 2000 to 2014. The results show that higher unemployment is associated with an increase in defaults, while higher house prices have a strong negative association with defaults. The analysis suggests that dealing effectively with mortgage default requires a mix of prudential regulation and institutional design improvements.

Pieter Gautier, Arjen Siegmann, Aico van Vuuren, 27 February 2018

In 2005, flat-fee real estate brokers entered the Dutch housing market, charging a substantially lower up-front fee than the average traditional brokers’ fee based on sale price. This column uses house sale data to demonstrate that flat-fee agents sell properties faster, and at an average price that is 2.7% higher than traditional agents. This suggests that the profits of traditional brokers are at least partly driven by rents, rather than performance.

David Miles, 07 February 2018

Over recent decades houses have become increasingly expensive in the UK, leading to what is routinely described as a ‘housing crisis’. This column assesses whether, over the long term, the UK experience is so unusual and explores the underlying forces at work. Two key elasticities and one technological factor are highlighted as being central to the story and will determine what happens over the next 50 years.

Wouter den Haan, Martin Ellison, Ethan Ilzetzki, Michael McMahon, Ricardo Reis, 28 November 2017

The usually buoyant London housing market is currently the weakest performing market in the UK. A majority of leading economists think that the phenomenon of declining prices will ripple out from London to the rest of the UK, according to the latest Centre for Macroeconomics and CEPR survey. Asked whether a widespread weakening of the housing market will slow GDP growth significantly, the experts are more divided. Several point to uncertainty about the eventual Brexit outcome making it very difficult to engage in predictions about house prices and growth; others suggest that lower house prices could be a good thing for the UK economy, especially for young people.

David Autor, Christopher Palmer, Parag Pathak, 16 November 2017

Separating cause from effect is notoriously difficult when it comes to gentrification and neighbourhood amenities, including public safety. This column exploits the sudden ending of a rent control regime in Cambridge, MA to examine whether and by how much gentrification affects crime. In the years immediately following the end of rent control, crime fell significantly more in neighbourhoods that had been heavily rent controlled. But those neighbourhoods also saw the highest turnover in occupants, suggesting that incumbent renters in these areas were priced out of their properties and thus missed out on the benefits from gentrification.

Alejandro Justiniano, Giorgio Primiceri, Andrea Tambalotti, 31 October 2017

The US witnessed an unprecedented boom in mortgage debt and house prices in the early 2000s, which precipitated the crisis in 2007. This column documents a sudden, large and persistent fall in the spread of mortgage over Treasury rates in the summer of 2003. It argues that the emergence of this ‘conundrum’ marked a crucial turning point in the dynamics of the boom, with the resulting easier credit conditions in the subprime market in particular leading to the origination of mortgages that defaulted progressively more frequently down the road.

Marta Auricchio, Emanuele Ciani, Alberto Dalmazzo, Guido de Blasio, 01 September 2017

The nature of the relationship between public and private employment is ambiguous, with studies showing that increased public employment can have both crowding-in and crowding-out effects on private employment. This column explores this relationship across Italian municipalities. It finds evidence of strong crowding-out effects across municipalities, which is partially explained by increased competition in the housing market.

Filipa Sá, 04 January 2017

One of the factors driving house price growth in many countries is foreign investor demand. Using new UK data, this column argues that foreign investment has had a significant positive effect on house price growth in the last 15 years. The effect is not limited to expensive homes but ‘trickles down’ to less expensive properties, and is stronger where housing supply is less elastic. Foreign investment is also found to reduce the rate of home ownership, but there is no evidence of an effect on the housing stock or share of vacant homes.



CEPR Policy Research