Housing Bubble Research Articles

From primitive accumulation to entangled accumulation: Decentring Marxist Theory of capitalist expansion

During the last few decades, the concept of primitive accumulation ( ursprüngliche Akkumulation) introduced by Karl Marx and expanded by Rosa Luxemburg has been revived and improved. Accordingly, scholars have used this framework not to characterize a past moment in the history of capitalism, but to grasp the continuous process of coupling and uncoupling geographical and social spheres in the capital accumulation in different fields: financialization, the care economy, green grabbing, the sharing economy, real estate bubbles, data mining, etc. Despite the quality and productivity of these debates, they are still focused on authors and phenomena observed in the Global North, ignoring a long tradition of similar discussions developed especially in Latin America. The article seeks to decentre these debates by taking seriously into account approaches which address primitive accumulation from the perspective of (post)colonial and (post)slave societies. It coins the concept entangled accumulation to emphasize the interdependencies between practices of exploitation and expropriation, wage and slave labour, state power and illegal violence, and capitalist and non-capitalist economies, which have shaped capital accumulation throughout history.

Mortgage Risk Premiums during the Housing Bubble

How did pricing for mortgage credit risk change during the years prior to the 2008 financial crisis? Using a database from a major American bank that served as trustee for private-label mortgage-backed securitized (PLS) loans, this paper identifies a decline in credit spreads on mortgages conditioned on loan and borrower characteristics. We show that observable risk factors, FICO score and loan-to-value ratio, had less of an impact on mortgage pricing over time. As the volume of PLS mortgages expanded and lending terms eased, risk premiums failed to price the increase in risk.

Complex network of United States migration

Economists and social scientists have studied the human migration extensively. However, the complex network of human mobility in the United States (US) is not studied in depth. In this paper, we analyze migration network between counties and states in the US between 2000 and 2015 to analyze the overall structure of US migration and yearly changes using temporal analysis. We aggregated network on different time windows and analyzed for both county and state level. Analyzing flow between US counties and states, we focus on the migration during different periods such as economic prosperity of the housing boom and economic hardship of the housing bust. We observed that nodes at county and state level usually remain active, but there are considerable fluctuations on links. This indicates that migration patterns change over the time. However, we could identify a backbone at both county and state levels using disparity filter. Finally, we analyze impact of the political and socioeconomic factors on the migration. Using gravity model, we observe that population, political affiliation, poverty, and unemployment rate have influence on US migration.

Dynamism Diminished: The Role of Housing Markets and Credit Conditions

The Great Recession and its aftermath saw the worst relative performance of young firms in at least 35 years. More broadly, as we show, young-firm activity shares move strongly with local economic conditions and local house price growth. In this light, we assess the effects of housing prices and credit supply on young-firm activity. Our panel IV estimation on MSA-level data yields large effects of local house price changes on local young-firm employment growth and employment shares and a separate, smaller role for locally exogenous shifts in bank lending supply. A novel test shows that house price effects work through wealth, liquidity and collateral effects on the propensity to start new firms and expand young ones. Aggregating local effects to the national level, housing market ups and downs play a major role – as transmission channel and driving force – in medium-run fluctuations in young-firm employment shares in recent decades. The great housing bust after 2006 largely drove the cyclical collapse of young-firm activity during the Great Recession, reinforced by a contraction in bank loan supply. As we also show, when the young-firm activity share falls (rises), local employment shifts strongly away from (towards) younger and less-educated workers.

Detecting Bubbles in the US and UK Real Estate Markets

This study considers state of the art subset selection and shrinkage procedures − stepwise regression, ridge regression, lasso, bridge regression and the elastic net along with the commonly employed least squares regression − to detect bubbles in real estate markets. Our analysis of real estate indices representing the commercial, residential and equity real estate sectors in the United States and the United Kingdom finds evidence suggesting the existence of significant periods of overvaluation in residential real estate, as well as economically significant periods of undervaluation in equity real estate markets. The evolution of specific real estate indices in the United States is similar to the evolution of the corresponding indices in the United Kingdom. In order to determine whether the observed deviations of the actual price index from its fundamental value are due to the presence of bubbles, we use two complementary methodologies, the first based on right-side unit root tests for explosive behaviour and the second defined by regime switching models for bubbles. We show that employing an average of all complex models yields more robust forecasting over an 8 years out-of-sample period.

Water Management in Urban Sprawl Typologies in the City of Alicante (Southern Spain): New Trends and Perception after the Economic Crisis?

In recent decades, territorial transformations have occurred on the Spanish Mediterranean coast due to the real estate bubble (1997–2008). The objectives of this research are: (1) to analyse the domestic water consumption trend in the study area (“Beach Sector” of the city of Alicante, Southern Spain) (2000–2017); and (2) explore water use and the characteristics of detached houses and how its residents have introduced water-saving measures to reduce consumption after the economic crisis in the study area. A review and analysis of data on housing and population has been carried out where this urban development type has been implemented. Moreover, surveys of the residents have been conducted in order to determine and analyse water consumption, and the perception and knowledge used to reduce water consumption in detached houses. The results show that consumption decreased between 2000 and 2017 due to different factors and there was no change in the water consumption trend at the end of the economic crisis. In view of the conclusions, it should be mentioned that this reduction has been associated with a greater environmental awareness of the need to save water, the installation of systems that use water more efficiently and water-saving devices. All of this is aimed at reducing the water bill that has been exacerbated by an increase in water prices seeing as this is the type of property that consumes the most water.

The Positive Externalities of Chapter 13 “Cramdowns” Could Prevent the Next Foreclosure Crisis

:Revision of Bankruptcy Code 11 U.S.C. § 1322(b)(2) would permit “cramdowns” wherein bankruptcy judges would administer the modification of residential mortgages only when mortgage-lending abuses were most rampant (a real estate bubble). Foreclosure spill-over effects systemically worsened the housing crisis and were not evenly diffused throughout the broader housing market. Throughout 2003–2006, an oversupply of underpriced mortgage finance emanating from lax underwriting standards bid up residential prices. Relaxation of underwriting protocols came about from the mortgage market’s institutional swing from regulated agency securitization (predominantly government-sponsored enterprises “GSEs”) to unregulated securitization (shadow banking). This resulted in an untenable residential-price bubble as synthetically inexpensive credit from investors’ mispricing amplified mortgage demand, while greater mortgage quantity nudged up housing prices. The result was a self-referential cycle of waning residential prices supporting and perpetuating nigh incessant foreclosures: the bubble had burst. Cramdowns would incentivize lenders to be less inclined to loosen underwriting standards, or when done, to include this factor in the risk premium of the cost of credit. Enhancing Chapter 13 with the muscle to alter residential mortgages would ameliorate an institutionally structural issue endemic to the past (and upcoming?) foreclosure crisis.

Is there a bubble in the Swedish housing market?

PurposeThis paper aims to investigate the presence of a housing bubble using Swedish data from 1986Q1-2016Q4 by using various methods.Design/methodology/approachFirst, the authors use affordability indicators and asset-pricing approaches, including the price-to-income ratio, price-to-rent ratio and user cost, supplemented by a qualitative discussion of other factors affecting house prices. Second, the authors use cointegration techniques to compute the fundamental (or long-run) price, which is then compared with the actual price to test the degree of Sweden’s housing price bubble during the studied period. Third, they apply the univariate right-tailed unit root test procedure to capture bursting bubbles and to date-stamp bubbles.FindingsThe authors find evidence for rational housing bubbles with explosive behavioral components beginning in 2004. These bubbles do not continuously diverge but instead periodically revert to their fundamental value. However, the deviation is persistent, and without any policy correction, it takes decades for real house prices to return to equilibrium.Originality/valueThe policy implication is that monetary policy designed to contain mortgage demand and thereby prevent burst episodes in the housing market must address external imbalances, as revealed in real exchange rate undervaluation. It is unlikely that current policies will stop the rise of house prices, as the growth of mortgage credit, improvement in Sweden’s international competitiveness and the path of interest rates are much more important factors.

Literature Review of the Research on Real Estate Financial Risk

After a brief conceptual explanation and background introduction of real estate finance and its risks, this paper mainly focuses on the relationship between real estate price fluctuation and financial risk, real estate bubble, the formation and transmission of real estate financial risk, and the control of real estate financial risk. Several research categories were classified and related research was reviewed. In the end, it summarizes and puts forward that China’s research on real estate financial risk also has the following problems and development direction: the research on the connotation of real estate financial risk needs to be improved; the research on real estate bubble needs to be quantified; the research on risk formation needs to be deepened from the mechanism; the research on risk transmission needs to be combined with the reality of China; and the empirical research on real estate financial risk needs to be improved.

Parent Housing Wealth, Credit Constraints, and Homeownership Transitions

In this paper, I examine how family housing wealth affects homeownership transitions during divergent periods of credit access. I use matched parent-child data from the Panel Study of Income Dynamics, and exploit variation across local housing markets, as well as the recent housing cycle, to assess this relationship. I explore how transfers are affected by parent housing values, for different housing market experiences, and for households with renter parents in these same neighborhoods. I find that increases in parent housing values are correlated with an increased likelihood of receiving a transfer, larger transfer amounts, and an increased likelihood of transitioning to homeownership during the housing bust, but not during the housing boom. In contrast, households with renter parents in these same neighborhoods are not differentially affected by local housing market fluctuations during the housing bust. Overall, my findings suggest that family wealth matters more for home purchases when there are barriers to formal channels of mortgage borrowing.

Local Capital Scarcity and Small Firm Growth: Evidence from Real Estate Booms in China

In geographically segmented credit markets, local real estate booms can deteriorate the funding conditions for small manufacturing firms and undermine their competitiveness. Using exogenous variation in the administrative land supply across 172 Chinese cities, we show that higher predicted real estate prices cause higher borrowing costs for small manufacturing firms, reduce their bank lending, lower their investment rate and labor productivity, and reduce their output and TFP growth by economically significant magnitudes. These effects are absent in large and listed companies with access to the national capital market. The evidence highlights the benefits of financial market integration.

Floating in Mud to Reach the Skies: Victor Sassoon and the Real Estate Boom in Shanghai, 1920s–1930s

AbstractThe historical waterfront of Shanghai known as the Bund, one of the most impressive architectural landscapes in Asia, was described in the 1930s inFortunemagazine as having “the tallest buildings outside the American continent; the biggest hoard of silver in the world” and being “the cradle of new China”.1At a time when the US economy was in ruins and much of China was besieged by civil war, Shanghai's foreign concessions provided a safe haven for Chinese and foreign investors. With the influx of hot money, Shanghai experienced an unprecedented building boom. Notable among these real estate developers was Sir Ellice Victor Elias Sassoon (1881–1961, hereafter Victor Sassoon) who transferred much of his wealth from India to Shanghai and then transformed the Shanghai skyline. Inspired by American skyscrapers, Sassoon decided to build the first skyscraper in Shanghai, which would also be the first in the Eastern hemisphere, even though Shanghai's muddy ground had never supported a building of that height before. This article documents how the evolution of treaty port architecture in China owed much to Victor Sassoon. Its innovations – from the advent of skyscrapers, with their Art Deco style and mixed-use function, to the engineering methods and financial arrangements that built them – bore Sassoon's stamp. As will be seen, Sassoon's experiment paid off handsomely.

Collateral Booms and Information Depletion

We develop a new theory of information production during credit booms. In our model, entrepreneurs need credit to undertake investment projects, some of which enable them to divert resources towards private consumption. Lenders can protect themselves from such diversion in two ways: collateralization and costly screening, which generates durable information about projects. In equilibrium, the collateralization-screening mix depends on the value of aggregate collateral. High collateral values raise investment and economic activity, but they also raise collateralization at the expense of screening. This has important dynamic implications. During credit booms driven by high collateral values (e.g. real estate booms), the economy accumulates physical capital but depletes information about investment projects. As a result, collateral-driven booms end in deep crises and slow recoveries: when booms end, investment is constrained both by the lack of collateral and by the lack of information on existing investment projects, which takes time to rebuild. We provide new empirical evidence using US firm-level data in support of the model's main mechanism.

Growth in Home Purchase Price Preceding Crisis Explained by Technology Advancement: Eddison Walters Risk Expectation Theory of the Global Financial Crisis of 2007 and 2008 Confirmed

Growth in Home Purchase Price Preceding Crisis Explained by Technology Advancement: Eddison Walters Risk Expectation Theory of the Global Financial Crisis of 2007 and 2008 Confirmed Dr. Eddison T. Walters Abstract The lack of evidence in the literature supporting the widely accepted theory of a real estate bubble, or a financial bubble which was the cause of the Global Financial Crisis of 2007 and 2008, prompted the researcher to raise questions regarding the cause of the Global Financial Crisis of 2007 and 2008. Walters (2018) presented evidence which suggested there was no statistically significant evidence in changes of net FDI inflow for developed countries for periods preceding and subsequent to the Global Financial Crisis of 2007 through 2008. The development of Eddison Walters Risk Expectation Theory of the Global Financial Crisis of 2007 and 2008, in Walters (2018) presented an alternative theory for the cause of the Global Financial Crisis of 2007 through 2008. This new theory resulting from data analysis in the research conducted in Walters (2018), raised serious questions regarding the accuracy of an abundance of available capital which was suggested as the cause of a financial bubble, leading to a real estate bubble in the United State housing market, causing the real estate crash, which triggered the Global Financial Crisis of 2007 and 2008.Questions raised in Walters (2018), called for further investigation into the cause of home purchase price increase, which many in the literature have suggested led to a real estate market crash in the United States preceding the Global Financial Crisis of 2007 through 2008. It is critical to gain an understanding of exactly what cause home purchase price across the United States to increase. This knowledge will provide researches with a better understanding of the cause of the Global Financial Crisis of 2007 and 2008, avoiding the same mistakes being made in the future. Full Text: PDF DOI: 10.15640/jibe.v7n2a15

They Called it a Boom: Nation Building in Coronado, California in 1888

In the wake of the Southern California land boom of the 1880’s, two Midwestern businessmen, Elisha S. Babcock and H.L. Story purchased all of Coronado and North Island,California in December 1885 with dreams of creating the premier resort destination in Californiafor Eastern elites. After incorporating into the Coronado Beach Company, they embarked on a publicity campaign facilitated by the local ​Coronado Evening Mercury​ and the very rails thatmade the land boom possible, netting enormous profits from lot auctions drowning inmiddle-class spectacle. This entire endeavor was contingent on the production of Coronado as athriving, sophisticated metropolis, with both cultural continuity with Eastern elite society andopportunity for advancement into middle-class whiteness. This project locates the cooperative construction of Coronado’s image between the Coronado Beach Company and the local presswithin the larger American project of incorporating the West into the nation through thecontinuation of established Eastern conceptions of gender, race, and class, resting on theideology of Anglo, middle-class male dominance.

A Tale of Two Cities: The Impact of Cross-Border Migration on Hong Kong’s Housing Market

This paper examines the effect of mainland Chinese buyers' housing purchase in Hong Kong. Contrary to media's allegation on mainland buyers causing huge bubbles in Hong Kong housing market, we find that mainland buyers only constitute less than 4% of housing transactions in Hong Kong from 2001 to 2017, and their price premium over locals is only 1.4% on average. The mainland premium is higher for properties attracting more interests from mainland buyers, such as luxury units larger in size (3.52%). We also find that the price premium varies with hedging demand for the currency risk over time (safe haven effect). Furthermore, the price premium is higher in buildings with more existing mainland homeowners (residential sorting). At last, the price premium is lower if the mainland buyer has stronger bargaining power such as more prior transaction experience or facing a mainland seller.

The Effect of Economic Uncertainty on the Housing Market Cycle

Executive Summary. We examine the spillover effect of economic uncertainty on the duration probability of housing market booms, busts, and normal times in 12 OECD countries. Quarterly data from 1985 to 2012 were used. Based on a discrete-time duration (hazard) model, we find that the probability of exiting housing market busts increases with higher economic uncertainty in a statistically significant fashion. Uncertainty, however, is not found to influence the likelihood of leaving booms and normal times. Our results suggest that housing serves as a possible hedge against uncertainty.

Housing Booms and Busts and Family Formation of Young Generations

I investigate a hypothesis that housing cycles change the youth's labor market conditions and influence their marriage and fertility decision. Different from the most literature that examine the effect of housing costs, rents or housing prices, on outcome variables, I construct MSA-level housing demand shock during the 2000-2006 boom, and exploit the cross-MSA variation in local housing booms to study its effects of housing booms on the local labor market opportunities for young men/women and on local marriage rate and fertility rate. To resolve the possibility of endogeneity, I utilize the size of structure break in local housing prices as an instrument variable. I find housing booms augment marriage rate among young men, especially those age 18-25. There is also a marginal positive impact on fertility rate for women age 18-25 and 26-33 and a negative effect on nonmarital birth rate. I also examine if the housing boom continuously affect these main demographic outcomes for new cohorts during the 2006-2012 housing busts. I find that the housing boom persistently and positively affects marriage rate of 18-25-year-olds during 2006-2012. In contrast, the effect for women age 26-33 reversed during the bust period: namely a decrease in marriage rate during the economic downturn.

Economic Trajectories of the Spanish Regions in the Post- Crisis Scenario: Neighborhood, Specialization and Agglomeration Effects

Over the last decade, the Spanish regions have undergone deep economic transformations that have gone hand in hand with changes in the production model. After the bursting of the housing bubble, growth has resumed through a recovery of the international competitiveness and a reorientation towards the foreign market. This new model has a clear territorial dimension visible in terms of unequal regional growth showing specific patterns and driving to a new territorial configuration. In order to define this nee configuration, we shall apply a spatial shift-share analysis to the Spanish regions for the periods 2008-13 (recession) and 2013-17 (recovery) aiming to split growth into its composing effects derived from neighborhood, sectorial specialization or the presence of economies of agglomeration. Thus, once the recession is over, the regions of the Mediterranean corridor along with the main metropolitan agglomerations (Madrid, Basque Country) are leading Spanish regional growth as a consequence of superior territorial competitiveness, showing that the divergent economic trajectories of regions can only be explained from the territory attending to concepts such as agglomeration and neighborhood.

URBAN MODERNITY AND THE POLITICS OF HEIMAT: GABRIELE TERGIT'S KÄSEBIER EROBERT DEN KURFÜRSTENDAMM

ABSTRACTThis essay explores an irony running through Gabriele Tergit's Berlin novel Käsebier erobert den Kurfürstendamm (1931): Heimat kitsch serves as a marketing brand for property speculation that is destroying Heimat in the sense of homes and familiar city localities. The novel conveys different ways of feeling at home in a great city, whether at work, or in cafés, parks, and streets full of personal memories and cultural associations. The politics of Heimat is a major theme as Jewish citizens increasingly face threats of exclusion from the German Heimat. Instead of domestic confinement as in traditional Heimat discourse, economic and educational emancipation gave women in the Weimar Republic access to civil society, but new tensions in the emotional economy of relations between the sexes and across generations bring new anxieties as well as new freedoms.