Relative Price Of Housing Research Articles

House price convergence in the very long run

AbstractWe examine the house price convergence across 12 OECD countries over the period 1905–2016. Using novel quantile unit root tests which allow for smooth breaks via a Fourier expansion series, we find that nine countries show the presence of relative house price convergence at all the quantiles. Focusing on several specific quantiles, 11 countries have significant convergence tendencies. Moreover, there are four definite patterns related to shocks in the relative house prices across quantiles.

지역별상대주택가격지수 개발에 관한 연구

Recently, in Korea, the polarization of real estate prices by region has deepened, causing social and economic problems. In particular, the government's expansion of taxation on owners of multiple homes to stabilize housing prices led to the exacerbation of the real estate price polarization between the metropolitan areas and local regions. As a methodology for monitoring this phenomenon of real estate price polarization by region, this study is based on 3 house transaction types for 4 house types targeting 17 cities and provinces and affiliated administrative districts, tentatively named 'Regional Relative House Price Index’. The purpose is to calculate the 'RRHPI' for observing trends in relative real estate prices by region at the national level, suggesting brand-new directions for conducting research related to the regional polarization phenomenon.

Softening the blow: US state-level banking deregulation and sectoral reallocation after the China trade shock

U.S. state-level banking deregulation during the 1980’s mitigated the impact of the China trade shock (CTS) on local economies (states and commuting zones) a decade later, in the 1990s. Local economies, where local banking markets opened up earlier, were also effectively financially more integrated by the 1990’s and saw smaller declines in house prices, wages, and income following the CTS. We explain this pattern in a theoretical model that emphasizes the stabilizing effect of financial integration on demand for housing and on housing prices: faced with an adverse shock to their region’s terms-of-trade (i.e. the CTS), households in more open states can more easily access credit to smooth consumption. This stabilizes consumer demand for housing, keeps the relative price of housing up, stabilizes wages in the non-tradable sector and thus facilitates the sectoral reallocation of labor away from import-exposed manufacturing towards the housing sector. This in turn stabilizes income and consumption. We corroborate these predictions of our model in state- and commuting zone level data. Then, using granular bank-county-level data, we show that household consumption smoothing in response to the CTS was easier in financially open areas, because geographically diversified banks were more elastic in their lending response to household’s increased demand for credit. Our findings highlight that household access to finance is important to ease adjustment after asymmetric terms-of- trade shocks in monetary unions, in particular when the geographical mobility of labor is limited.

House prices in the Ottoman Empire: evidence from eighteenth‐century Edirne†

AbstractThis study uses a new dataset of 2,246 notarial deeds of house sales from one of the major cities of the Ottoman Empire, Edirne, covering the period from 1720 to 1814. It estimates real hedonic house prices and urban wealth inequality for the housing market. It shows that house size, proximity to the commercial centre, access to fresh water, and family ties were important determinants of relative house prices. These findings also apply to the different quartiles of the market, indicating limited market segmentation. It demonstrates that there was an increase in housing wealth inequality during the eighteenth century as house prices became more dispersed. The hedonic house price index provides evidence that inflation‐adjusted house prices declined substantially following the Russo‐Turkish war of 1768–74. The decline is mainly explained through demographic shocks induced by plague epidemics, natural disasters, and other population movements driven by wars, army mobilization, and political upheavals.

Extrapolation and House Price Overreaction: Evidence from Local Jurisdiction Mergers

This paper uses two similar local jurisdiction merger policies at different phases of a housing cycle to examine whether home purchasers form their expectations of future house prices based on lagged price changes. Using a detailed housing transaction data set, we find that, during the boom period, the relative home prices in the merged area increased significantly for a few months after a positive fundamental shock and then reverted. However, during the bust period, we find no overreaction of the relative house prices in the local merged districts after a similar shock. Moreover, we find that short-term speculators may be the main contributor to the housing price overreaction. Overall, our results confirm the role of over-extrapolation in house price dynamics.

Commuting in Europe: An Inter-regional Analysis on its Determinants and Spatial Effects

Commuting shapes countless everyday-lives around the world, with dynamics varying from city to regional and cross regional level. Taking as reference the free-movement EU-28 area (plus Switzerland and Norway), the analysis considers a total sample of 195 NUTS2 regions over the decade 2007-2017 to depict regional cross-border dynamics, thus including the impacts of the 2008 financial crisis. The tested presence of spatial interactions among regions leads to the adoption of the Spatial Durbin Model in a panel context, thus including fixed effects in order to eliminate any time influence on variables as well as any regional idiosyncrasy (i.e. cultural, institutional etc.). The outcoming analysis highlights the potentiality of temporary contracts in preserving jobs during crisis, as they offer a flexible tool for employment adjustments. Moreover, the regional specialization in the knowledge sector is found to be an important attractor of external workers as well as a relatively effective retaining factor of the domestic labour force. But there are also other factors affecting mobility. For instance, the perceived commuting distance significantly depends on the time needed to reach the corresponding workplace and this study finds that the more diffused is the transportation system (in terms of highways’ density) the higher the commuting outflow. A similar impact is found with respect to housing costs, that is the cheaper is the relative house price of the region of residence with respect to the surrounding territories, the more travel-to-work becomes an attractive option, even in its extend of long-distance commute. Finally, a last strong push factor of mobility is found in the lack job opportunities, here expressed as the unemployment rate differential for each single territory with respect to its surroundings. Indeed, the higher the lack of job opportunities in the domestic market with respect to its neighbours, the higher the share of workers that will try to seek their fortune crossing the regional border.

The Relative Price of Housing and Subsequent GDP Growth in the USA

In the USA a high relative price of housing is associated with log GDP growth over the following 5 years. It is possible to forecast the great recession using this pattern and a trend both estimated with 20th century data. The forecast recession is even more severe than the actual recession.

Housing attributes and relative house prices in Ghana

PurposeThe study of house prices has become more relevant in recent times after the global financial crisis. Using a housing data set from three regions of Ghana (collated from real estate agents), the purpose of this paper is to estimate the relative importance of housing attributes to house prices.Design/methodology/approachThe hedonic regression analysis conducted indicates that location is the most powerful determinant of house prices. Other relevant factors are the number of bedrooms, the number of floors, the total floor area, land size, age of the house and luxury finishing.FindingsThe implications of these results are many. Policy wise, the study provides an evidence-based empirical study that supports the need for better urban planning to improve communities, which in turn is associated with house price appreciations. Homeowners, investors and creditors, particularly mortgage lenders could be the immediate beneficiaries. Drawing on this, improved urban planning could mitigate strategic defaults that results from house prices falling below mortgage loan balances. This is important for financial market stability.Originality/valueThe paper provides a comprehensive and unique understanding of the hedonic determinants of house prices in Ghana. Future studies could examine the effect of location upon mortgage lending in Ghana.

Repeat sales house price indices: comparative properties under alternative data generation processes

ABSTRACT Accurate analysis of housing markets requires the use of an appropriate house price index. We compare the properties of two common repeat sales house price indices [Bailey, Muth and Nourse (BMN) and Case-nd Shiller (CS)] with those of Gao and Wang’s unbalanced panel (UP) approach. Using data across three differing housing markets within New Zealand, the three indices produce similar measures of house price movements. When evaluated using separate training and testing sub-samples of the data, none of the three measures is unambiguously superior to the others. When we test properties using simulated data with alternative data generation processes, a clear result emerges: The CS method is clearly superior when relative house prices follow an actual or near random walk; otherwise the UP method is (slightly) superior. Thus researchers should consider the time series properties of their data when choosing a method of house price index construction.

Regional heterogeneity in age-related housing depreciation rates

This paper analyses the regional variation of age-related depreciation rates for housing: firstly, using observations of single-family house prices, our analysis estimates housing market-specific age-cohort depreciation rates, while taking into account the heterogeneity in attributes, location, and state of maintenance. Secondly, we examine whether the derived depreciation rates correlate with determinants of the regional supply- and demand-side. Considering the durability of the housing stock and substitution effects in housing demand, we find that a rise in excess supply will not only lead to declining house prices in the aggregate, but also to a widening of relative house price differentials among houses at different ages.

Immigration and Swiss House Prices

SummaryThis study examines the behavior of Swiss house prices in relation to immigration flows for 85 regions from 2001 to 2006. The results show that the nexus between immigration and house prices holds even in an environment of low house price inflation and modest immigration flows. An immigration inflow equal to 1 % of an area’s population is coincident with an increase in prices for single-family homes of about 2.7 %, a result consistent with previous studies. The overall immigration effect for single-family houses captures almost two-thirds of the total price increase.

An Empirical Analysis of the Long-Run Relationship Among Regional House Prices in Turkey

In this study, convergence among the house prices of the seven big cities in Turkey is investigated using monthly data covering the period January 2003 and June 2015. Linear unit root and unit root with structural breaks tests suggest that relative house prices are not stationary. Unit root with break tests identify statistically significant breakpoints in the house prices dated after the implementation of mortgage law. Multivariate and bivariate Johansen cointegration tests are applied to explore further the long-run relationship among the house prices. Although we found one cointegrating relationship among the seven regions for the whole period, the stability tests based on the recursive estimation of the cointegrated model indicate the presence of two different periods before and after the mortgage law. The multivariate and pairwise cointegration tests based on two subsamples report a remarkable decline in the number of cointegrating vectors after the enactment of the mortgage law and that might be taken as an evidence for the weakening the relationship among house prices.

Evaluation of urban scenarios using bid-rents of spatial interaction models as hedonic price estimators: an application to the Terceira Island, Azores

This paper aims to present and test a methodology capable of determining the impact of urban scenarios and policies through the use of calibrated bid-rents of a spatial interaction model (SIM) as hedonic price estimators of the real estate houses. This approach responds to the increasing requirement of decision support systems to assess complex effects of urban policies because through linking the bid-rents with hedonic prices, it is possible to connect the quantity estimates of the spatial interaction models with the value estimates of the hedonic price approach. The combined methodology is applied to Terceira Island to assess the spatial and economic impact of the decrease in activity of Lajes Military Airfield on employment and on the real estate value of the island. The SIM distributes employment and population by the 31 zones of Terceira Island in the Azores given the distances between zones, the basic employment per zone, the average distances for commuting and shopping and the space available for urban activities. The model’s friction parameters are iteratively calibrated to secure that estimated average commuting and shopping distances are equal to those observed in reality; bid-rents are also calibrated to guarantee that the demand for space in each zone does not overcomes the available sspace for urban activities per zone. The SIM is coded and integrated in MATLAB 2013a. Afterward, a hedonic price regression is estimated to explain house prices in relation to the calibrated bid-rents and house typologies. The effect of the Lajes Military Airfield drawdown is estimated by the SIM, which evaluates the impacts on employment and population, and a hedonic price regression is subsequently performed with the new SIM bid-rents,to appraise the new real estate value. Results show that the Lajes Military Airfield reduction of 750 basic employment will result not only in a decrease of 1552 total employments and 3502 of the 56,437 residents of the island but also in a loss of 55 million € in real estate value. The method has proved its usefulness and effectiveness for predicting the impacts of exogenous shocks in complex urban systems.

Does Selling State Silver Generate Private Gold? Neighbourhood Impacts of State House Sales

This paper utilises two politically determined natural experiments affecting state-provided social housing to examine the impact that housing tenure status has on neighbourhood outcomes. From 1990, New Zealand’s National government sold a substantial number of state houses either to existing tenants (Home Buys) or to other purchasers (vacant sales). From 1999, the Labour government ended Home Buys, reduced vacant sales and increased acquisitions. While vacant sales had no material effects on local outcomes, a higher prevalence of Home Buys led to increased local house price appreciation despite demographic trends that would otherwise have led to falling relative house prices in those communities.

Is the relationship between monetary policy and house prices asymmetric across bull and bear markets in South Africa? Evidence from a Markov-switching vector autoregressive model

This paper examines asymmetries in the impact of monetary policy on the middle segment of the South African housing market from 1966:M2 to 2011:M12. We use Markov-switching vector autoregressive (MS-VAR) model in which parameters change according to the phase of the housing cycle. The results suggest that monetary policy is not neutral as house price growth decreases substantially with a contractionary monetary policy. We find that the impact of monetary policy is larger in bear regime than in bull regime; indicating the role of information asymmetry in reinforcing the financial constraint of economic agents. As expected, monetary policy reaction to a positive house price shock is found to be stronger in the bull regime. This suggests that the central bank reacts more in bull regime in order to prevent potential crisis related to the subsequent bust in house prices bubbles which are more prominent in bull markets. These results substantiate important asymmetries in the dynamics of house prices in relation to monetary policy, vindicating the advantages of generating regime dependent impulse response functions.

Shifting Confidence in Homeownership: The Great Recession

We study the responses to several questions related to real estate that were added to the Michigan Survey of Consumers in July and August of 2011. Specifically, we asked about attitudes toward renting versus buying a home; about commuting; and about how much to spend on a mortgage. By matching the results to data about relative house price declines during the recent crisis (at the ZIP-code level), we can study the relationship between the housing crash and individual attitudes. We find that younger respondents are relatively less confident about homeownership after larger declines, while older respondents are relatively more confident. In both cases, this is observed only for those with personal experience of loss (via themselves or someone close) during the crash. We find no effect on attitudes toward commuting, and we find that people who live in the high-decline areas believe it is appropriate to spend more on a mortgage.

HOUSING IN A NEOCLASSICAL GROWTH MODEL

We present evidence that in the USA, the relative price of housing exhibits secular growth and that its growth rate is a stationary series. The ratio of the value of house stock to either consumption or GDP is also stationary. We develop a two-sector neoclassical growth model with housing that is consistent with these facts. Among the long-run determinants of the growth of housing prices and housing stock per capita are factor intensities, rates of technological progress in both the housing and non-housing sectors, and the excess of population growth over land growth. We also study the model's transitional dynamics.

Household expenditures, wages, rents

New evidence from the 1980, 1990, and 2000 Decennial Census of Housing indicates that expenditure shares on housing are constant over time and across US metropolitan statistical areas (MSA). Consistent with this observation, we consider a model in which identical households with Cobb–Douglas preferences for housing and non-housing consumption choose a location and locations differ with respect to income earned by their residents. The model predicts that the relative price of housing of any two MSAs disproportionately reflects differences in incomes of those MSAs and is independent of housing supply in each MSA. According to the predictions of our calibrated model, the dispersion of rental prices across low- and high-wage MSAs should be larger than we observe: High-wage MSAs like San Francisco are puzzlingly inexpensive relative to low-wage MSAs like Pittsburgh.

Relative House Price Dynamics Across Euro Area and US Cities: Convergence or Divergence?

This paper examines the time varying dispersion in city house price levels across the four biggest euro area countries compared with those in the United States. Using available city-level data over the period 1980-2008, it tests for price convergence and analyses key factors explaining price difierentials in a panel regression framework including per capita income, population and relative distances. Results indicate limited evidence of convergence in city-level house prices despite synchronised cycles in the national aggregates for most countries since the 1990s. There is an important role for income difierentials in explaining city-level house price dispersion in Germany, France, and the US (but not in Italy or Spain once unobserved city factors are taken into account). At the same time, population difierences across cities play a role, though this appears to be associated with amenities speciflc to a particular location. In general, there has been a lower dispersion of city-level house prices in the four largest euro area economies compared with the US in conjunction with a lower estimated income elasticity for house price difierentials. The results, particularly for income, appear to be robust to restricting the analysis to large urban centres.

Comment

Comment [Return to Article] Roger G. Noll: U.S. housing policy is a jumble of numerous programs, many of which appear to use similar means to accomplish the same objective. Professors Jaffee and Quigley do a comprehensive job of categorizing and assembling the financial costs of these programs. The only housing policy that is missing from the analysis is a group of programs that provide subsidies for housing the homeless, but collectively these programs are small compared to the programs analyzed in their essay.1 For other direct housing assistance programs and tax benefits, the authors provide estimates of the distribution of the financial gains from these policies by income class. For programs that promote homeownership through mortgage guarantees, the authors summarize other research that evaluates these programs and offer a policy reform proposal. The policy recommendation is that mortgage assistance programs be more targeted toward low-income households, that the government tax the debt of federal mortgage assistance agencies (to reflect the risk to the government of guaranteed mortgages), and that the government use the revenue to expand the housing voucher program. These comments address two issues that could affect an assessment of housing policy, including the authors' proposed reforms, but are not addressed by them. The first is whether there is a rational basis for the complexity of federal housing policy and the implications of the relationships among programs. The second is the appropriate method for estimating the benefits and costs of housing programs. Whether it makes sense to tax the mortgage programs to [End Page 131] expand the voucher program and to orient mortgage programs more toward low-income households assumes certain answers to these questions. The Mismatch between Policies and Instruments A major puzzle about U.S. housing policy is why the portfolio of programs is so large. As Jaffee and Quigley note, U.S. housing policy apparently has two goals: to increase housing consumption among low-income households and to promote homeownership generally. As do Jaffee and Quigley, this section assumes that these goals are valid and focuses solely on whether they could be achieved more efficiently. The mechanism for achieving housing goals is to lower the relative price of housing by offering subsidies, but the number of separate housing subsidy programs is over a dozen. Jaffee and Quigley document some of the complexity of housing programs. Whereas direct housing assistance to low-income households now focuses mostly on rental assistance vouchers, expenditures to support public housing remain almost as large as the voucher program. Other direct expenditure, tax expenditure, and mortgage guarantee programs seek to induce housing construction and renovation of rental housing for the poor, while other programs subsidize both supply and demand for homeownership among low-income households.2 In addition, most of the financial cost of tax expenditures and mortgage guarantee programs subsidizes families that are not poor. Why the government needs numerous programs for each goal is a mystery. Jaffee and Quigley do not address why the federal government has so many housing programs and only implicitly address whether the efficiency of housing assistance could be significantly improved by simplifying the array of housing policies and programs or by reallocating effort among them. Implicit in their proposal to tax mortgage guarantee programs in order to expand voucher programs are three beliefs: the government's efforts in housing should be reallocated from promoting ownership to providing direct assistance; subsidized mortgage guarantees are an inefficient mechanism for promoting ownership (compared to direct and tax expenditures that do the [End Page 132] same thing); and as a means of reaching the poor rental vouchers are more effective than other housing programs, such as subsidized construction and renovation of rental housing or subsidized homeownership through down-payment and mortgage assistance. In context, their proposal arises from a discussion about how to internalize the fiscal risk of mortgage guarantees to the government, rather than more generally about how to improve the performance of the portfolio of housing assistance programs; however, the proposal implies two...