Price Appreciation Research Articles

Can America’s Fastest-Growing City Save Itself?: Property Rights and the Planning Ethic in Boise, Idaho

In 1974, an article in Harper’s Magazine declared that “[i]f things go on as they are, Boise [Idaho] stands an excellent chance of becoming the first American city to have deliberately eradicated itself.” At the time, Boise had decided to try its hand at urban renewal, just as many other cities were abandoning the federally-funded destruction of American downtowns. In Boise, the map of “blighted” properties to be torn down approximated half of each of the 50 blocks of the city’s downtown. Disinvestment in the urban core followed the plan’s release leaving a hollowed-out core and a bleak future for the city. The Harper’s article described the scene: “[O]n a recent warm, bright Tuesday morning — perfect shopper’s weather — a cannonball, if fired the length of the sidewalk” along the “principal canyon of trade along Idaho Street,” “would have struck exactly nineteen people.” How times have changed. In 2017, the U.S. Census declared Boise the fastest-growing city in America. In 2020, Meridian and Nampa, two of Boise’s suburban communities, were named among the ten fastest-growing cities in the United States. In 2021, Zillow announced that Idaho was the state with the highest home price appreciation in the decade between 2010 and 2020. Almost all of that appreciation came in the Boise metropolitan region, which Zillow noted saw a jaw-dropping appreciation of “over three times” in that decade. Despite the enormity of the change in Boise, its growth is very similar to growth seen by other cities in the Intermountain West over the last century. Boise should be able to learn from the mistakes of those cities that have gone before it and plan in advance for growth. But will Boise do so? The article explores both the ways that Boise's growth is unique to its remote location, but also how the city is emblematic of many other fast-growth cities. Such fast growth cities have the potential to dramatically affect the externalities of development before they occur, but such cities routinely fail to seize these opportunities because of political objections to regulation and lack of institutional knowledge in its governmental processes. Can Boise change that trajectory? And if not, under what circumstances can we expect planning to make a difference? The article offers an approach forward.

How can state governments support healthier housing markets?

Housing affordability has become an increasingly salient political issue across the U.S. in the past several years, reflecting rapid price appreciation in many metropolitan areas. State governments are beginning to push back against the prerogative of “local control” over land use regulation and housing production. In this paper, I examine the potential benefits of more targeted state engagement with housing markets; review the kinds of policy tools through which state governments can influence housing market outcomes; outline broad goals to guide statewide housing policy; and document the contrasting approaches currently taken by five states. Current state approaches vary widely in the intensity of state engagement, policy goals and tools. Housing market outcomes also differ across and within states; statewide policy approaches should be tailored to specific goals and market conditions.

Racial Differences in Mortgage Refinancing, Distress, and Housing Wealth Accumulation during COVID-19

The COVID-19 pandemic exacerbated racial disparities in U.S. mortgage markets. Black, Hispanic, and Asian borrowers were significantly more likely than white borrowers to miss payments due to financial distress, and significantly less likely to refinance to take advantage of the large decline in interest rates spurred by the Federal Reserve’s large-scale mortgage-backed security (MBS) purchase program. The wide-scale forbearance program, introduced by the 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act, provided approximately equal payment relief to all distressed borrowers, as forbearance rates conditional on nonpayment status were roughly equal across racial/ethnic groups. However, Black and Hispanic borrowers were significantly less likely to exit forbearance and resume making payments relative to their Asian and white counterparts. Persistent differences in the ability to catch up on missed payments could worsen the already large disparity in home ownership rates across racial and ethnic groups. While the pandemic caused widespread distress in mortgage markets, strong house price appreciation in recent years, particularly in 2020, means that foreclosure risk is lower for past-due borrowers now as compared with the aftermath of the Global Financial Crisis and Great Recession. Furthermore, borrowers who have missed payments have significantly higher credit scores now than those who were distressed in the 2007–2010 period, largely due to the widespread availability of forbearance for federally backed mortgages.

INTERNAL AND EXTERNAL DETERMINANTS OF HOUSING PRICE BOOM IN HONG KONG

Hong Kong’s housing market witnessed a dramatic housing price appreciation in recent years, with the price index for private domestic housing units being three times higher than ten years ago. This trend is supported by both internal and external factors, as illustrated in this paper. By developing a theoretical model and an empirical analysis on the key variables influencing housing prices using monthly data from 1999 to 2018, we find that the main drivers of housing price appreciation are from the demand side and include income level, money supply and inflation. The main contribution of this study is the quantification of the role of Mainland China’s macroeconomic factors in housing price booms in Hong Kong. Our study shows that capital inflow from and inflation and recessions in Mainland China contribute to increasing housing prices in Hong Kong because the city’s real estate is seen as a way to preserve asset value. These findings call for the need for control of capital inflow between the two economies as well as for stricter regulations against empty houses in Hong Kong.

The Resilience and Realignment of House Prices in the Era of Covid-19

Purpose:The article analyzes the effects of the COVID-19 pandemic on house prices.Design/Methodology/Approach:We start by discussing the possibility that house price indexes may not fully incorporate the effects of the pandemic as of yet. Against the background of the pandemic, we then analyze economic and behavioral effects affecting house prices. We also discuss how the linkages between tourism and house prices have been affected. We further present evidence of an emerging shift in preferences from urban locations to more peripheral ones.Findings:We report variance in the evolution of house prices across countries at the onset of the pandemic, with locations depending heavily on tourism showing slower price appreciation while appreciation has firmed in other places. We argue that the resilience of house prices is due not only to the low interest rate environment and government efforts to support firms and households, but also behavioral factors. In some locations, the price of condominiums has declined relative to the price of detached houses. This could indicate that wealthier households are seeking more space and larger units as a result of the crisis. There is also evidence of a downward pressure on rents, leading to increased price-rent ratios in the U.S.Originality/Value:By considering both economic and behavioral factors, this paper provides for a better understanding of the resilience and realignment of house prices at the onset of the COVID-19 pandemic.

Light at the end of the tunnel:The impacts of expected major transport improvements on residential property prices

Properties near public transportation systems are usually sold at a premium owing to the willingness of firms and people to pay for access to workplace and leisure. However, the economic impact of major infrastructure investments remains an empirical question plagued by identification issues. We investigate the economic impacts of a major transportation development project currently under construction in Hong Kong: the Tuen Mun–Chek Lap Kok tunnel, namely the effects on property prices of the expansion of the regional road network in the Greater Bay Area. We identify a significant accessibility premium well before the tunnel is completed. There is also a change in market structure of increased preference for residential property in areas closer to the tunnel, reflected by higher price appreciation. The findings help guide urban planning and public investment decisions, as well as the design and implementation of land value capture policy.

The Housing and Rental Price Effects of Unskilled and Skilled Immigration in the United States: 2013–2017

This paper examines the impact of unskilled (not college-educated) and skilled (college-educated) immigration on housing prices and rental prices. An instrumental variable approach is employed to investigate causal effects. Results show that an increase in unskilled immigration inflows may lead to a greater rental price appreciation, but an increase in skilled immigration inflows may lead to a lower rental price appreciation. Contrary to previous studies, this study finds that immigration inflows have little housing price effects.

Bitcoin-energy markets interrelationships - New evidence

The annual electricity consumption of cryptocurrency transactions has grown substantially in recent years, partially driven by the increasing difficulty in mining, but also driven by the large number of new market participants that have been attracted by the elevated prices of this developing financial asset. Total carbon production from mining now likely exceeds that generated by individual developed nations. This is now a prevailing and accepted feature in cryptocurrency markets, however unsustainable it may be. This paper investigates as to how Bitcoin's price volatility and the underlying dynamics of cryptocurrency mining characteristics affect underlying energy markets and utilities companies. Further analysis of potential side-effects within the market for Exchange Traded Funds are considered. The results show a sustained and significant influence of cryptocurrency energy-usage on the performance of some companies in the energy sector as separated by jurisdiction, emphasising the importance of further assessment of environmental impacts of cryptocurrency growth. Robustness testing presents evidence that dynamic correlations peaked during the sharp Bitcoin price appreciation of late-2017 as investors re-evaluated how this increased energy usage would influence the profitability of utility companies.

Decompositions of house price distributions over time: The rise and fall of Tokyo house prices

AbstractWe use recentered influence function regressions to decompose the differences in the distribution of sales prices across five stages of the business cycle in Tokyo for 1986–2016. Tokyo's housing market went through a period of rapid appreciation in prices during this time, followed by a long period of decline and a more recent increase. We find that a substantial portion of the change in the distribution of condominium prices across time periods is due to the natural aging of the housing stock, but also due to the location of the sales and the tendency for units to get larger over time.

Rural-urban migration and house prices in China

This paper uses a dynamic competitive spatial equilibrium framework to evaluate the contribution of rural-urban migration induced by structural transformation to the behavior of Chinese housing markets. In the model, technological progress drives workers facing heterogeneous mobility costs to migrate from the rural agricultural sector to the higher paying urban manufacturing sector. Upon arrival to the city, workers purchase housing using long-term mortgages. Quantitatively, the model fits cross-sectional house price behavior across a representative sample of Chinese cities between 2003 and 2015. The model is then used to evaluate how changes to city migration policies and land supply regulations affect the speed of urbanization and house price appreciation. The analysis indicates that making migration policy more egalitarian or land policy more uniform would promote urbanization but also would contribute to larger house price dispersion.

US House Price Projections from the Economic Impact of the Coronavirus

Could the coronavirus-induced economic shocks hurt US house prices as much as the global financial crisis (GFC) did? This article identifies four drivers that could produce much milder house price depreciation (HPD) this time: early and broad mortgage- and housing-relief policy responses, the apparent lack of a preceding house price bubble, historically moderate mortgage- and consumer-debt levels, and lower mortgage rates. The authors apply a previously published time series–based house price model, combined with these exogenous drivers. Fitted to historical data between 1987 and 2020, the model estimates a 1.66 transmission rate from GDP underperformance to HPA underperformance, a ratio of 0.3 between HPA and a mortgage rate relative percentage rally. If mortgage rates rally from 3.7% in 2019 to 2.7% and the GDP takes a hit of 11% below-trend growth, then the model estimates roughly 10% below-trend growth for national HPA, which is much milder than the experience during the GFC. <b>TOPICS:</b>Financial crises and financial market history, MBS and residential mortgage loans <b>Key Findings</b> • National house price depreciation due to the coronavirus may be much milder than the previous crisis, due to effective mortgage and housing relief policy, lack of a preceding house price bubble and mortgage debt bubble, and lower mortgage rates. • Our house price model combines a time-series property with these exogenous drivers and estimates the sensitivity to each driver. • Our model projects 10% below-trend growth for national house price appreciation (HPA) if the US GDP takes a hit of 11% below-trend growth, supported with a 1% mortgage rate rally.

Housing as a site of accumulation in Amsterdam and the creation of surplus populations

Many major cities around the world have undergone a steep housing price appreciation in recent years, creating windfall profits for some, while for others, the costs of living have risen considerably faster than their income. The resulting social stratification effects have received much scholarly scrutiny, and also raised discussions on whether or not we have to abandon ‘older models’ of class. By extending Marx's notion of surplus populations from primary work-related exploitation to housing-centred secondary exploitation, this article argues that older models are perfectly equipped to account for the various strata of 'asset-haves' and 'asset-have-nots'. Focusing in particular on the 'asset-have-nots’, the article utilizes the Dutch city of Amsterdam as a case study to illustrate how the acceleration of housing as a site of accumulation not only co-creates surplus populations but also an increasing share of people who find themselves at the frontiers of becoming surplus populations.The city of Amsterdam is particularly interesting as it has undergone one of the highest and most rapid real estate price increases in Europe in recent years, which has not only decreased the affordability and accessibility of housing for the low- but increasingly also middle-income strata. The article shows that the accelerated accumulation in the realm of housing, and the concomitant creation of surplus populations, are not mechanical law-like regularities of financialised capitalism. Instead, various forms of state regulation have facilitated and mediated the scale, timing and the way in which overaccumulated surplus capital has been absorbed through housing.

The Health Consequence of Rising Housing Prices in China

China has experienced a rapid boom in real estate prices in the last two decades, leading to a substantial increase in living costs and heavy financial burdens on households, which may subsequently induce health problems. This paper examines the health consequence of rising housing prices by exploiting spatial and temporal variation in housing price appreciation linked to individual-level health data in China from 2000 to 2011. Using an instrumental variable approach, we find robust evidence that increases in housing prices significantly raise the probability of residents having chronic diseases. This negative health impact is more pronounced among individuals from low-income families, households that purchased rather than inherited or were allocated the home, and individuals with a rural registry. Exploring various possible channels, we find that marriage market competition exacerbates the negative health effects, particularly for males and parents with young adult sons. We also find evidence that housing price appreciation induces negative health consequences through increased work intensity, higher mental stress, elevated tobacco use and reduced sleep time. This paper underlines the unintended health consequences of the real estate market prosperity.

Home price appreciation and residential lending standards

We explore the effect of home price appreciation on residential lending standards in the U.S. across different sample periods. Using housing supply elasticity measures as instrumental variables for home price changes, we find that rising home prices led to easing lending standards between 2001 and 2006. Mortgage acceptance rates increased more in MSAs that experienced higher home price appreciation, contributing to the credit boom. However, we find that home price appreciation is associated with tighter lending standards between 2012 and 2016, suggesting that banks took a more cautious view of home price appreciation after the financial crisis. To study the negative relationship between home price appreciation and lending standards during the post-crisis years, we examine loan acceptance rates of small and large banks separately. We find that it was the small banks who lowered loan acceptance rates in MSAs with higher home price appreciation, which caused the overall loan acceptance rates to decline.

Corporate Relocation and Housing Market Spillover

This study investigates the spillover effect of corporate headquarters relocation on the local housing market. Using a comprehensive database to identify corporate relocation events in the U.S. from 1994 to 2017, we show that moving a corporate headquarters into a district is significantly associated with housing price appreciation in the district. The growth in housing prices for districts with a corporate headquarters relocation is 10% higher than in those without. Moreover, housing prices increase in the year before the relocation, which suggests the presence of a speculation and expectation effect. Housing prices increase further until 2 years after the relocation, which demonstrates the prolonged impact of corporate relocation on the housing market. The cumulative effect over the period results in more than 30% higher growth in housing prices for districts with a corporate relocation. Further, we find a significant spatial spillover effect of corporate relocation on nearby districts’ housing markets up to 15 miles. We next examine the channels through which corporate relocation affects housing prices, including the relocating firm’s employee base, firm activity, and agglomeration economies. Lastly, we observe a marginally negative effect as a result of a headquarters moving out of a district. Overall, our study indicates that corporate relocation exhibits significant positive spillover on the local housing market.

Oil Price and Real Exchange Rate Appreciation: Is there Dutch Disease in Nigeria?

Oil Price and Real Exchange Rate Appreciation: Is there Dutch Disease in Nigeria?

FEAR Index, city characteristics, and housing returns

AbstractWe use Google search frequency to construct a measure of aggregate sentiment in housing markets—Financial, Economic, and Real Estate (FEAR) Index—and analyze its relationship to housing returns. We find that housing markets react inversely to changes in FEAR Index, which captures negative sentiment, and that market characteristics affect the strength of this relationship. More financially distressed markets, as measured by bankruptcy rates and mortgage default double trigger, are more responsive to changes in FEAR Index than less distressed markets, and cold markets (markets with slow price appreciation) are more responsive than hot markets (markets with rapid price appreciation). We also examine these characteristics jointly and find that cold markets with financial distress are the most responsive to negative sentiment. Finally, we show that home prices are more sensitive to negative sentiment during recessionary periods.

Why were interest-only mortgages so popular during the U.S. housing boom?

Borrowers in U.S. cities where house prices boomed in the 2000s relied heavily on backloaded interest-only (IO) mortgages that require borrowers to only pay interest for the first few years of the loan. We develop a theory that encompasses common explanations for IO use, and show that while they can account for much of the regional variation in IOs, they cannot explain why IOs were popular in boom cities. We propose a new explanation. In our model, uncertain price appreciation coupled with non-recourse lending can lead to speculation financed with backloaded mortgages. We find evidence that IO borrowers behaved in ways consistent with such speculation, and discuss the policy implications of our findings.

Are Pricier Houses Less Risky? Evidence from China

Houses are the largest component of most households’ wealth and their risk is important. Recent research shows that pricier houses have lower price appreciation risk. This relationship can be due to competing reasons: risk is related to the price level, or risk is related to location-related features that are reflected in prices. This paper disentangles these two relationships by analyzing condo data from China with a special feature: Condos in the same subdivision have identical location but different prices. Our results indicate that larger and pricier condos are less risky than smaller ones in the same location. Furthermore, for condos with the same size, those with higher price per square meter are less risky. These results seem to indicate that pricier houses are less risky not due to location-related features that are reflected in prices.

Asymmetries across regional housing markets in Turkey

In the literature on real estate prices, two main groups of determinants are primarily considered; speculative and fundamental variables. Empirical literature in the areas has, however, several shortcomings. First, although existing studies have analysed the role played by speculative factors, none of the studies, have measured precisely the relative importance of speculative and fundamental variables. We aim at doing this. Moreover, the literature has measured the speculation only by analysing backward-looking behavior. We improve this analysis by considering also forward-looking expectations. Second, in terms of cross-regional determinants, the literature has largely considered economic and demographic variables whereas geographical and cultural variables have been ignored. We intend to incorporate them. Hence, aim of this paper is to understand the dynamics behind the housing prices in 26 Turkish regions between 2010:1–2016:9. We employ range of econometric methods such as Vector-Autoregressions, Unit Root Analysis, Cholesky Forecast Error Variance Decompositions, Impulse-Response Functions, Panel Regressions, Lagrange Multiplier Spatial Dependence Tests and Granger Causality Tests. As an outcome, three results emerge. First, housing price appreciations are so heterogeneous across regions. Second, role of speculative behaviour is quite significant. Third, regions which have high urbanization, population, crime rate, trade openness, seaside and cultural density experience faster housing appreciations.