Falling House Prices Research Articles

The research on factors influencing housing prices-take Beijing as an example

Housing price is not only related to the economic situation of individuals and families, but also has a profound impact on the whole social economy. For many families, their home is their biggest asset. A rise in house prices can increase household net assets. A fall in house prices could lead to a decline in assets. This paper aims to study the influencing factors of housing prices. The data in this paper take Beijing from May to July 2014 as an example. First of all, the article mentions some papers about housing prices, then the author uses scatter plot and linear regression to fix the model. In the results, it can be seen that sqft-living, sqft-above and view have a relatively high correlation with housing prices. Finally, the specific correlation data table is listed. The final conclusion gives the results of the research in this paper and the authors of the articles mentioned. Housing price is not only related to the economic situation of individuals and families, but also has a profound impact on the whole social economy.

Wealth inequality and the distributional effects of maximum loan-to-value ratio policy

Macroprudential policy improves economic outcomes by reducing the likelihood and severity of financial crises. Yet, are there unintended long run consequences to the introduction of a macroprudential policy regime, and are they conditional on the level of wealth inequality? I answer these questions by looking at the effect of a reduction in the maximum loan-to-value (LTV) ratio on homeownership rates, house prices and housing wealth inequality across two economies with different initial wealth dispersion. I use a heterogeneous agent model in which households face an endogenous borrowing limit in the form of a collateral constraint. A reduction in the LTV limit tightens the borrowing constraint and changes the levels of wealth at which households rent or become constrained or unconstrained owners. The key finding of this paper is that initial conditions matter; a greater share of households is affected when wealth is distributed more equally. This larger impact on aggregate demand leads to a stronger fall in house prices and a larger rise in the share of constrained homeowners and housing wealth inequality. The effects are also non-linear in the LTV ratio, with progressively stronger effects at lower LTV ratios.

Alert to the Potential Crisis in the Real Estate Environment: Learn from International Lessons and Find a Way out

In the early years after New China's creation, China's real estate industry was far from being on a large scale, and the planned economic system restricted the development of real estate enterprises. It was not until after 1978 that, along with the development and deepening of the reform and opening-up policy, the level of urbanisation in China gradually increased and the rise in the standard of living of the people also stimulated the enthusiasm of the residents to purchase homes, making the real estate industry expand at a rapid pace. The value added of China's real estate industry and its contribution to the economy have been on a steady rise, with significant growth and an increasing proportion. The real estate sector has become an integral part of the tertiary industry. However, there have been several obstacles to China's real estate industry's growth, as evidenced by the financial crisis in 2008 and the impact of the new crown epidemic on China. This paper analyseS the impact of the real estate industry on the whole economy during the recession and the potential crisis in China through the economic crises in the US and Japan. Through analysis, it can conclude that a rapid fall in house prices before the economy has fully recovered under the impact of the epidemic could be a major potential crisis for the country. Recommendation: Be wary of the trap of high and low property price differentials and adhere to the policy of no speculation in house prices.

Community banks' capital requirements and regional housing tenure

AbstractBank capital requirements aim at reducing the likelihood of banks' failure. However, these policies may generate externalities on the overall economy. By investigating the pathways from capital requirements to housing tenure using structural equation modelling, we show that community banks' capital requirements increase the gap between the regional real estate loans‐based and non‐real estate loans‐based housing purchase rate and act as driving factors of housing market imbalance. The drop in residential real estate loans caused by the increase in capital requirements has two opposite effects: the direct effect motivates residents to rent properties, while the indirect effect motivates residents to purchase them due to the fall in housing prices. When both effects exist in housing purchases with real estate loans, the former effect is more influential than the latter one. Our findings suggest that the impact of capital requirements on housing tenure will depend on residents' reliance on real estate loans. If a housing purchase requires real estate loans, capital requirements will have a negative impact on the housing purchase, and vice versa.

House prices, homeownership, and household consumption: Evidence from household panel data in Korea

Using Korean household panel data, this paper investigates the impact of house price changes on household consumption, focusing on asymmetric responses across homeownership status and the direction of house price fluctuations. I find that rising house prices have little influence on household consumption, whereas a decrease in house prices brings about a substantial impact. Falling house prices reduce homeowners’ consumption and raise renters’ consumption, implying that the opposing pressures on two household groups could substantially offset each other. The responses are found to be asymmetric across several aspects of household heterogeneities. Owners of multiple houses or relatively larger residences and older owners show greater responses. In response to rising house prices, homeowners with loan-to-value ratios at the standard cutoff level for a home equity line of credit substantially increase their consumption. Several pieces of evidence support the operation of the wealth effect and collateral effect channels.

To Live Peaceably Together: The American Friends Service Committee’s Campaign for Open Housing, by TRACY E. K’MEYER

This historical monograph chronicles the varying strategies adopted by the Quaker organization, the American Friends Service Committee (AFSC), to improve the housing opportunities for black families. For almost three decades beginning from the 1940s, the AFSC made cohousing a priority whilst rarely being able to achieve wholesale success. Using the detailed local and national minutes and reports typical of Quaker organizations, Tracey K’Meyer has been able to reconstruct the successes and challenges of the initiatives. In so many ways and in concert with each other, hostile neighbors, developers, realtors, and the apparatus of local government—all supported by the fear of falling housing prices should neighborhoods become racially mixed—blocked attempts to desegregate the suburbs. It is a well-rehearsed history that continues today. What makes the book distinct is its detailed focus on a single faith-based organization’s attempts to promote equality of opportunity and the techniques it pioneered. Given the abundance of data available to the author, the account is rich both in chronological detail but also into the personalities and background of some of the leading staff members working on the ground in Chicago, Richmond, California, and Philadelphia. It gives an ample portrait of Quaker service agency and the value of the book lies in its meticulous attention to detail whilst remaining highly readable. As K’Meyer suggests, academic work on the activists remains under-researched.

주택조세강화가 수도권 아파트 가격에 미치는 영향에 관한 연구

In this study, the effect of the recently strengthened heavy taxation of capital gains tax and comprehensive real estate tax on the apartment market in the metropolitan area was analyzed using the vector error correction model. As a result of the shock response analysis, the volume of apartment sales transactions in the Seoul metropolitan area had the greatest impact on the apartment sales price index, followed by mortgage loans in the Seoul metropolitan area and GDP. On the other hand, it was found that there was no significant shock reaction to the heavy capital gains tax and the heavy comprehensive real estate tax. However, most parallaxes show negative (-) values, indicating that they negatively affect apartment sales prices in the Seoul metropolitan area. As a result, it can be seen that the apartment market in the metropolitan area is generally affected by changes in the housing tax system, such as heavy capital gains tax and heavy comprehensive real estate tax, along with housing finance, supply, and macroeconomic factors. As a result of this analysis, the housing-related tax strengthening policy can contribute to stabilizing the housing market by lowering housing prices during the rapid rise in housing prices. However, the tax strengthening policy during the period of falling housing prices due to the economic recession can cause a sharp downturn in the housing market.

Buyer behaviour and price expectations: a spatial analysis of the Athens residential market

PurposeThis paper examines the price setting behaviour over time and space in the Athens residential market. In periods of house price inflation asking prices are often based upon the last observed highest selling price achieved for a similar property in the same micro-location. However, in a falling market, prices may be rigid downwards and less sensitive to the most recent transaction prices, weakening spatial effects. Furthermore, the paper considers whether future price expectations affect price setting behaviour.Design/methodology/approachThe paper employs a dataset of approximately 24,500 property values from 2007 until 2014 in Athens incorporating characteristics and locational variables. The authors begin by estimating a baseline hedonic price model using property characteristics, neighbourhood amenities and location effects. Following this, a spatio-temporal autoregressive (STAR) model is estimated. Running separate models, the authors account for spatial dependence from historic valuations, contemporaneous peer effects and expectations effects.FindingsThe initial STAR model shows significant spatial and temporal effects, the former remaining important in a falling market contrasting with previous literature findings. In the second STAR model, whilst past sales effects remain significant although smaller, contemporaneous and price expectations effects are also found to be significant, the latter capturing anchoring and slow adjustment heuristics in price setting behaviour.Research limitations/implicationsAs valuations used in the database are based upon comparable sales, then in the recessionary periods covered in the dataset, finding comparables may have become more difficult, and hence this, in turn, may have impacted on valuation accuracy.Practical implicationsIn addition to past effects, contemporaneous transactions and expected future values need to be taken in consideration in analysing spatial interactions in housing markets. These factors will influence housing markets in different cities and countries.Social implicationsThe information content of property valuations should more carefully consider the relative importance of different components of asking prices.Originality/valueThis is the first paper to use transactions data over a period of falling house prices in Athens and to consider current and future values in addition to past values in a spatio-temporal context.

Monetary determinants of house prices in Central and Eastern European countries

This research aimed at the empirical estimation of the monetary determinants of house prices in the Czech Republic, Hungary, Poland, and Romania. The application of quarterly panel data for the period 2010-2019 indicates that a central bank policy rate increase was responsible for the fall in house prices, with a similar effect on house prices by a higher consumer inflation and nominal (real) exchange rate undervaluation. There was no reaction of house prices to the business cycle. However, the housing boom had a positive contribution to cyclical changes in output, while not affecting consumer prices and exchange rate.

A Study on the Estimating Economic Value for Undergroundization of Waste Treatment Facility using the Hedonic Pricing Model

Waste is the by-product of human activity. As long as mankind exists, waste generation is an indispensable factor. In order to stable disposal of waste, waste treatment facilities should be constructed. However, it is difficult to construct the facilities because they are recognized as NIMBY (‘not in my backyard’) facilities due to concerns such as odors, noise, and falling housing prices. Recently, a number of undergroundization of waste treatment facilities have been constructed to reduce negative impacts, but it is rare to research on economic values that can support the feasibility of the project. Therefore, this study aims to the estimating economic value for the undergrounding project (Hanam-si) using the hedonic pricing model. The analysis was conducted on apartment houses located within 3 km of waste treatment facilities, and the variables were determined by actual transaction prices, housing structure variables (size, floor, room, BCR, FAR etc) and external variables (commencement and completion date of subway, complex shopping mall and waste treatment facility) from 2011 to 2017. As a result of the analysis, the construction of undergroundization project is resulted in a 1.953% increase, and completion of the project is 1.374~1.654% increase in housing prices. The influence of housing structure variables is greater than the external variables. In addition, commencement variables are more influential than completion variable in undergroundization project.

Households and real estate: Strategies of accumulation and inequality in Spain, 2002-2017

Real estate has traditionally been an important economic resource for Spanish households. The development of the real estate market in Spain during the 21st century brings forth two very different stories. The first story is one of obstacles to access housing. It has become increasingly hard to buy or rent a home. Housing prices have risen considerably in urban areas while people’s income changed very little. The second story is one of accumulation of properties. Housing has been, and continues to be, a form of saving, investment and speculation for small and large property-owners. Falling housing prices permitted resourceful households to accumulate more properties during the financial crisis. These two stories lead to the following question: How did changes in the ownership of properties impact inequality in Spain? In this Perspectives Demogràfiques, we analyse how developments in the real estate market are connected to wealth inequality in Spain. The results point at a polarization of access to property; both the number of households without property and the number of households with multiple properties increased over time. Because real estate is the most important form of household’s wealth, the accumulation of properties has become a non-negligible part of wealth inequality between households in Spain.

Household debt and macroeconomic stability: An empirical stock‐flow consistent model for the Danish economy

AbstractThis paper addresses the issue of household debt in the Danish economy. We develop a large‐scale stock‐flow consistent model. The model has five main sectors namely, household, firms, financial corporations, government, and the rest of the world sectors. We use the model to explore the macroeconomic stability of the Danish economy, given the recent level of household debt. We fit the model to annual data from 1998 to 2016, estimate the structural parameters, and simulate the model for a baseline scenario, against which we compare and contrast the effects of different economic shocks. To assess the macroeconomic risks associated with high household debt, we introduce two shocks separately—a fall in house prices and a rise in interest rates—finding that these shocks have adverse effects on the economy. Focusing on macroeconomic stability, we find that private domestic demand seems to be relatively sensitive to the changes in interest rates and house prices, but the overall output is less affected, mainly due to strong current account surplus. Overall, it can be concluded that in the absence of global shocks, domestic shocks to the economy may not pose a serious risk to macroeconomic stability, when purely focusing on the sensitivity of output growth and unemployment.

Community development with externalities and corrective taxation

Abstract This paper studies the impact of granting a community the authority to tax development when growth imposes negative externalities on existing residents. Taxes are chosen in each period by the residents who are fully forward-looking. Residents’ policy choices reflect not only the desire to counter negative externalities but also their wish to raise tax revenues and the value of their homes. There exists an equilibrium in which taxes are gradually lowered to close to optimal levels, resulting in falling housing prices and increasing community size. In addition, there exist equilibria in which taxes are set much too high and development is permanently stalled. In these equilibria, residents anticipate that lowering taxes will cause a sharp fall in the value of their homes. This multiplicity of equilibrium means that, for a broad range of initial conditions, allowing residents to tax development can increase or decrease social welfare. Regulating growth with zoning generates even worse outcomes, but allowing the community to charge developers impact fees does better.

The credit risk of Chinese households: A micro‐level assessment

AbstractUsing three waves of the China Household Finance Survey (CHFS), we present basic facts about indebtedness and financial fragility of households in China between 2011 and 2015. We show how the total debt and mortgage debt (LTV) are distributed among different income groups, and how they change over time. Our stress tests suggest that Chinese households in higher quintiles, despite the huge increase in household indebtedness, are not vulnerable to declining incomes or falling house prices, while the low‐income households face high vulnerability and struggle to meet their debt commitments. However, the participation rate of low‐income households in the debt market is low, and household debt is mainly held by wealthier and higher‐income households. Our results suggest that the systematic default risk of Chinese household debt is moderate.

Demographics and the Housing Market

How does a shrinking population affect the housing market? In this study, drawing on Japan’s experience, we find that there exists an asymmetric relationship between housing prices and population change. Due to the durability of housing structures, the decline in housing prices associated with population losses is estimated to be larger than the rise in prices associated with population increases. Given that population losses have been and are projected to be more acute in rural areas than urban areas in Japan, the on-going demographic transition in Japan could worsen regional disparities, as falling house prices in rural areas could intensify population outflows. Policy measures to promote more even population growth across regions, and avoid the over-supply of houses, are critical to stabilize house prices with a shrinking population.

Demographics and the Housing Market: Japan's Disappearing Cities

How does a shrinking population affect the housing market? In this study, drawing on Japan’s experience, we find that there exists an asymmetric relationship between housing prices and population change. Due to the durability of housing structures, the decline in housing prices associated with population losses is estimated to be larger than the rise in prices associated with population increases. Given that population losses have been and are projected to be more acute in rural areas than urban areas in Japan, the on-going demographic transition in Japan could worsen regional disparities, as falling house prices in rural areas could intensify population outflows. Policy measures to promote more even population growth across regions, and avoid the over-supply of houses, are critical to stabilize house prices with a shrinking population.

What drove the 2003–2006 house price boom and subsequent collapse? Disentangling competing explanations

Ten years after the financial crisis, the central question of what explains the rise and fall in house prices remains unresolved. We provide a unified framework to examine four excess credit supply variables and three speculation variables that have been proposed in the literature. Credit supply variables, particularly subprime share and worse originator share, strongly relate to future zip-code-level house price changes in the boom and bust, whereas none of the speculation variables consistently relate to house prices within MSAs. Pre-trends, supply elasticity, and depressed areas suggest these relations are not driven by lenders anticipating house price growth.

Alternative explanation of the money illusion: The effect of unexpected low inflation

In this study, a theoretical framework was constructed to verify whether the inflation level determines the presence of money illusion. The unexpected occurrence of low inflation is typically taken as an indication that the economy has entered or is entering a recession, and people expect the Federal Reserve to rapidly intervene to recover the economy. Because rental contracts facilitate rent price rigidity, rent prices may not decline immediately in the presence of unexpected low inflation, causing house owners in general to consider their rent returns as still lucrative. The excess profits from the rent returns of house owners can be used to compensate potential loss incurred from falling housing prices in the future, subsequently reducing their risk of property ownership. Therefore, when encountering unexpected low inflation, house owners tend to lower their expectations of housing return risk and overestimate the housing price, thus resulting in money illusion effects. A long-term data set of the US housing market (sample period: 1960 Q1 – 2016 Q1) was employed to comprehensively estimate the biases of the price–rent ratio. The estimation results revealed that money illusion effects only exist in conditions with minimal commodity price increases or decreases, which comply with the hypothesis of the present study. Finally, this study evaluated expected housing risk and housing premiums and confirmed that unexpected low inflation increases housing premiums, consequently leading to a higher rise in housing prices than in rent prices and contributing to the mispricing of price–rent ratios.

Canada

This Technical Note on Financial Safety Net and Crisis Management for the Canada focuses on housing finance. Housing finance is broadly resilient, but pockets of vulnerabilities exist. Mortgage finance is dominated by domestic systemically important financial institutions (D-SIFIs) and supported by the government via mortgage insurance, securitization guarantees, and other policies. With a market share of about 70 percent, D-SIFIs focus on prime borrowers, and their lending is backed by their strong balance sheets. The cost of prime mortgage financing is low and little differentiated, with credit risk being under-priced in some segments. Aspects of Canada’s mortgage finance may amplify procyclical effects of falling house prices during severe downturns. Core lenders focus on low-risk mortgage lending. In response to deteriorating household debt-servicing capacity, they may constrain new lending or renewals of maturing uninsured mortgages, potentially adding pressures on the housing market. Alternatively, a sudden adoption of risk-based pricing to accommodate financially weak borrowers might amplify household debt servicing fragility.

An asymmetric partisanship effect: House price fluctuations and party positions

AbstractPolitical economy arguments on party behaviour usually address parties of the left and the right. This article introduces a novel argument that portrays house price changes as an economic signal that right‐wing parties disproportionately respond to in their programmatic positioning. This asymmetric partisanship effect is driven by homeowners’ importance for right‐wing parties as a core voter group. Increasing house prices improve homeowners’ economic prospects. Right‐wing parties thus have some flexibility to reach out to undecided voters by targeting the centre of the political spectrum. Falling house prices, however, signal worsening economic outlooks for homeowners. Right‐wing parties thus have a strong incentive to send out signals of reassurance and prioritise their core voters. For a sample of Organisation for Economic Cooperation and Development (OECD) countries from 1970 to 2014, the findings support this argument. Right‐wing parties move programmatically leftwards with booming house prices and rightwards when house prices fall, while parties of the left do not respond systematically.