House Price Volatility and Housing Ownership over the Lifecycle

We develop and test a model on the effects of spatial housing price risk on housing choice. Housing price risk can be substantial but, unlike other risky assets which people can avoid, most people want to eventually own their home thereby creating an insurance demand for housing ownership early in life. With increasing demographic needs over the life cycle, our model predicts that people living in places with higher housing price risk should own their first home at a younger age, should live in larger homes, and should be less likely to refinance. These predictions are shown to hold using comparable panel data from the United States and United Kingdom. (JEL D12, D91

The unexpected global financial crisis : researching its root cause

The world is currently still struggling with the aftermath of the worst economic crisis since the Great Depression. Following a description of the eruption, evolution and consequences of the global crisis, this paper reviews alternative hypotheses for the causes of the global financial crisis as well as their empirical evidence. The paper refutes the frequently voiced view that the global crisis was caused by global imbalances that reflected economic policies of East Asian countries. Instead, it argues that global imbalances were the result of excess demand in the United States, resulting from both the public debt in the United States arising from the Afghanistan and Iraqi wars and tax cuts and the overconsumption by households supported by the wealth effect from the housing bubble in the United States. The housing bubble itself was the outcome of the Federal Reserve's low interest rate policy in the aftermath of the burst of the"dot-com"bubble in 2001, the lack of appropriate financial regulation, and housing policies aimed at expanding the mortgage market to low-income borrowers. It was possible to maintain the large trade deficits of the United States for such a long period of time because of the dollar's reserve currency status. When the housing bubble in the United States burst, the global crisis ensued. The paper also analyzes why China's trade surplus increased significantly in general and with the United States in particular in recent years, and argues that this increase was caused by both the relocation of the labor-intensive tradable sector of East Asian economies to China and high corporate saving rates in China as a result of its dual-track approach to reform.Debt Markets,Currencies and Exchange Rates,Emerging Markets,Economic Theory&Research,Access to Finance

The Effects of Demographics on the Real Estate Market in the United States and China

This paper focuses on the demographic and economic factors that affect the changes in prices of the housing market. The study focuses on the United States housing market after its recent collapse due to the US financial crisis of 2008. It also looks at the Chinese housing market based on the determinants that are observed in the United States. It will also examine the after effects of the One Child Policy enacted in 1979 on the housing prices. The study will look at the current situation with the Chinese housing market and its similarities to the United States housing market before the US financial crisis. The study uses data from the United States Federal Bank of St. Louis’ Federal Reserve Economic Database (FRED) in a regression analysis to find the determinants of the National Composite Home Price Index for the United States, which tracks housing price fluctuation. The factors used are GDP, CPI, Supply of Homes, Real Median Income, Age Group “15-64”, Unemployment Rate, Mortgage Debt Outstanding, and Higher Education (Bachelor’s Degree or higher). The results show that working age population of “15-64” is statistically significant in the change of housing prices. Using the model, we will forecast the housing prices in the year 2030 and 2050. The study will also explore the options for the United States and Chinese government to maintain a healthy and transparent housing market

The affordable housing crisis : solutions and recommendations for a sustainable future

Across the United States, the lack of affordable housing availability for extremely low-income and very low-income households has reached epidemic proportions. There is not a single state in the country with enough affordable and available units of housing to house all the extremely low-income households that qualify. The United States Department of Housing and Urban Development has responded to this crisis with assistance in the form of the Housing Choice Voucher program; however, only one in four families eligible to receive a voucher actually receive assistance. Cities, counties and states across the United States are being forced to acknowledge the crisis in affordable housing and address the crisis with evidence-based and innovative affordable housing solutions. This report provides context for the affordable housing crisis and analyzes housing solutions taking place in different municipalities and states across the United States. Finally, this report will include recommendations to guide policymakers and advocates as they search for ways to increase the supply and availability of affordable housing in the years to come.Public AffairsSocial Wor

Introduction to price and productivity measurement for housing

This paper provides a brief introduction to a proposed new opportunity cost treatment of owner-occupied housing in measures of inflation for the United States. In addition, the paper introduces, and provides links to, a collection of nine other papers that discuss various aspects of the treatment of owner-occupied housing in measures of inflation for a number of nations, including Canada, Germany, Iceland, and the United States.Durable goods, Consumer ; Consumer price indexes ; Cost of living adjustments ; Housing

Why didn’t Canada’s housing market go bust?

Housing markets in the United States and Canada are similar in many respects, but each has fared quite differently since the onset of the financial crisis. A comparison of the two markets suggests that relaxed lending standards likely played a critical role in the U.S. housing bust.Mortgage loans ; Housing - Canada

A Descriptive Analysis of U.S. Housing Demand for the 1990s

We analyze the effect of changes in type of household formation (i.e., single person, single parent, married couple, etc.) on the demand for housing and segment income by household type to determine housing tenure. Using data disaggregated by household type, we forecast housing demand for the United States through the turn ofthe century. The results indicate that total housing demand for the decade will be 11.8 million units, of which 8.1 million will be owner-occupied and 3.7 million will be renter-occupied

A Panel of Price Indices for Housing, Other Goods, and All Goods for All Areas in the United States 1982-2008

This paper produces a panel of price indices for housing, other produced goods, and all produced goods for each metropolitan area in the United States and the non-metropolitan part of each state from 1982 through 2008 that can be used for estimating behavioral relationships, studying the workings of markets, and assessing differences in the economic circumstances of people living in different areas. Our general approach is to first produce cross-sectional price indices for a single year 2000 and then use BLS time-series price indices to create the panel. Our geographic housing price index for 2000 is based on a large data set with detailed information about the characteristics of dwelling units and their neighborhoods throughout the United States that enables us to overcome many shortcomings of existing interarea housing price indices. For most areas, our price index for all goods other than housing is calculated from the price indices for categories of non-housing goods produced each quarter by the Council for Community and Economic Research. In order to produce a non-housing price index for areas of the United States not covered by their index, we estimate a theoretically-based regression model explaining differences in the composite price index for non-housing goods for areas where it is available and use it to predict a price of other goods for the uncovered areas. The overall consumer price index for all areas is based on the preceding estimates of the price of housing and other goods. The paper also discusses existing interarea price indices available to researchers, and it compares the new housing price index with housing price indices based on alternative methods using the same data and price indices based on alternative data sets. Electronic versions of the price indices are available online.Interarea price indices, interarea housing price indices, geographic cost-of-living differences, geographic price differences

House Price Volatility and Household Indebtedness in the United States and the United Kingdom

Recent household financial models predict that collateral-constrained households are more likely to increase debt-financed spending in response to rising house values. We augment this model to consider the use of unsecured debt such as credit cards. Using household panel data, we consider microeconomic evidence on the behaviour of households in the United States and the United Kingdom in response to rising house prices. The evidence confirms that previously collateral-constrained households in both countries increase their indebtedness more than unconstrained households as house prices rose. But whereas United Kingdom households used house price gains primarily to refinance existing unsecured debt, United States households were more likely to increase their total indebtedness. Our results imply that on average households in the United States extract as much as 10% of their housing equity gains to fund consumption spending, and suggest that housing wealth effects predominantly arise through unbinding liquidity constraints.Housing wealth; collateral; unsecured debt; consumer spending.