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| Author | : Pascal Towbin |
| Publisher | : International Monetary Fund |
| Total Pages | : 35 |
| Release | : 2015-07-30 |
| Genre | : Business & Economics |
| ISBN | : 1513596233 |
Download Price Expectations and the U.S. Housing Boom Book in PDF, ePub and Kindle
Between 1996 and 2006 the U.S. has experienced an unprecedented boom in house prices. As it has proven to be difficult to explain the large price increase by observable fundamentals, many observers have emphasized the role of speculation, i.e. expectations about future price developments. The argument is, however, often indirect: speculation is treated as a deviation from a benchmark. The present paper aims to identify house price expectation shocks directly. To that purpose, we estimate a VAR model for the U.S. and use sign restrictions to identify house price expectation, housing supply, housing demand, and mortgage rate shocks. House price expectation shocks are the most important driver of the boom and account for about 30 percent of the real house price increase. We also construct a model-based measure of exogenous changes in price expectations and show that this measure leads a survey-based measure of changes in house price expectations. Our main identification scheme leaves open whether expectation shifts are realistic or unrealistic. In extensions, we provide evidence that price expectation shifts during the boom were primarily unrealistic and were only marginally affected by realistic expectations about future fundamentals.
| Author | : Itzhak Ben-David |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 2019 |
| Genre | : |
| ISBN | : |
Download Expectations During the U.S. Housing Boom Book in PDF, ePub and Kindle
We infer the role of price expectations in forming the U.S. housing boom in the early- 2000s from examining housing inventories. We use a reduced form model to show that agents invest in vacant homes when they anticipate prices will increase. Empirically, vacancy can discriminate between price movements related to shocks to demand for housing services (low vacancy) and shocks to expectations (high vacancy). Using a structural vector autoregression with sign restrictions, we show that expectation shocks were a prime factor explaining the boom particularly in the Sand States, which experienced unprecedented booms.
| Author | : Thomas Sowell |
| Publisher | : Basic Books (AZ) |
| Total Pages | : 194 |
| Release | : 2009-05-12 |
| Genre | : Business & Economics |
| ISBN | : 0465018807 |
Download The Housing Boom and Bust Book in PDF, ePub and Kindle
Explains how we got into the current economic disaster that developed out of the economics and politics of the housing boom and bust. The "creative" financing of home mortgages and "creative" marketing of financial securities based on these mortgages to countries around the world, are part of the story of how a financial house of cards was built up--and then collapsed.
| Author | : MeiChi Huang |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 2015 |
| Genre | : |
| ISBN | : |
Download The Role of People's Expectation in the Recent US Housing Book in PDF, ePub and Kindle
This paper investigates how an important driver of the recent housing boom and bust, people's expectation, influences housing asset returns. Specifically, it extends the volatility feedback model to study the relationship between housing volatility and asset returns during 1963-2007. The analysis considers two alternative breakpoints, 1984Q1 and 1999Q1, in order to distinguish the permanent structural break from temporary Markov-switching volatility. The novelty of this study lies in its insightful investigations into the recent U.S. housing boom and bust in the post-1999 period in four dimensions. First, the significantly negative volatility feedback effect in the housing market suggests a positive relationship between housing volatility and expected asset returns, and highly supports the important role of people's expectations in the recent housing boom and bust. Second, the high-volatility regimes of the housing market delivered by this study indicate a strong association between housing cycles and business cycles, as well as a remarkable uncertainty in the U.S. housing market after the recession 2001. Third, the violated fundamental which refers to the broken negative relationship between housing volatility and realized asset returns during 2001-2004 implies the possible presence of a housing bubble during this period. Finally, volatility feedback anticipates the recent bubble-like housing market dynamics because high volatility during 2002-2003 implies low realized returns i the early housing-boom stage (2002-2003), as well as high expected returns i the second stage of the housing boom (2004-2005).
| Author | : Pascal Towbin |
| Publisher | : International Monetary Fund |
| Total Pages | : 35 |
| Release | : 2015-07-30 |
| Genre | : Business & Economics |
| ISBN | : 1513581279 |
Download Price Expectations and the U.S. Housing Boom Book in PDF, ePub and Kindle
Between 1996 and 2006 the U.S. has experienced an unprecedented boom in house prices. As it has proven to be difficult to explain the large price increase by observable fundamentals, many observers have emphasized the role of speculation, i.e. expectations about future price developments. The argument is, however, often indirect: speculation is treated as a deviation from a benchmark. The present paper aims to identify house price expectation shocks directly. To that purpose, we estimate a VAR model for the U.S. and use sign restrictions to identify house price expectation, housing supply, housing demand, and mortgage rate shocks. House price expectation shocks are the most important driver of the boom and account for about 30 percent of the real house price increase. We also construct a model-based measure of exogenous changes in price expectations and show that this measure leads a survey-based measure of changes in house price expectations. Our main identification scheme leaves open whether expectation shifts are realistic or unrealistic. In extensions, we provide evidence that price expectation shifts during the boom were primarily unrealistic and were only marginally affected by realistic expectations about future fundamentals.
| Author | : Carlos Urrutia |
| Publisher | : International Monetary Fund |
| Total Pages | : 42 |
| Release | : 2010-03-01 |
| Genre | : Business & Economics |
| ISBN | : 1451982070 |
Download Financial Liberalization, Structural Change, and Real Exchange Rate Appreciations Book in PDF, ePub and Kindle
We account for the appreciation of the real exchange rate in Mexico between 1988 and 2002 using a two sector dynamic general equilibrium model of a small open economy with two driving forces: (i) differential productivity growth across sectors and (ii) a decline in the cost of borrowing in foreign markets. These two mechanisms account for 60 percent of the decline in the relative price of tradable goods and explain a large fraction of the reallocation of labor across sectors. We do not find a significant role for migration remittances, foreign reserves accumulation, government spending, terms of trade, or import tariffs.
| Author | : Martin Eichenbaum |
| Publisher | : University of Chicago Press |
| Total Pages | : 517 |
| Release | : 2016-06-22 |
| Genre | : Business & Economics |
| ISBN | : 022639574X |
Download NBER Macroeconomics Annual 2015 Book in PDF, ePub and Kindle
This year, the NBER Macroeconomics Annual celebrates its thirtieth volume. The first two papers examine China’s macroeconomic development. “Trends and Cycles in China's Macroeconomy” by Chun Chang, Kaiji Chen, Daniel F. Waggoner, and Tao Zha outlines the key characteristics of growth and business cycles in China. “Demystifying the Chinese Housing Boom” by Hanming Fang, Quanlin Gu, Wei Xiong, and Li-An Zhou constructs a new house price index, showing that Chinese house prices have grown by ten percent per year over the past decade. The third paper, “External and Public Debt Crises” by Cristina Arellano, Andrew Atkeson, and Mark Wright, asks why there appear to be large differences across countries and subnational jurisdictions in the effect of rising public debts on economic outcomes. The fourth, “Networks and the Macroeconomy: An Empirical Exploration” by Daron Acemoglu, Ufuk Akcigit, and William Kerr, explains how the network structure of the US economy propagates the effect of gross output productivity shocks across upstream and downstream sectors. The fifth and sixth papers investigate the usefulness of surveys of household’s beliefs for understanding economic phenomena. “Expectations and Investment,” by Nicola Gennaioli, Yueran Ma, and Andrei Shleifer, demonstrates that a chief financial officer's expectations of a firm's future earnings growth is related to both the planned and actual future investment of that firm. “Declining Desire to Work and Downward Trends in Unemployment and Participation” by Regis Barnichon and Andrew Figura shows that an increasing number of prime-age Americans who are not in the labor force report no desire to work and that this decline accelerated during the second half of the 1990s.
| Author | : Itzhak Ben-David |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 2019 |
| Genre | : |
| ISBN | : |
Download Inferring Expectations from Observables Book in PDF, ePub and Kindle
We propose a new method to identify shifts in price expectations in the housing market through the accumulation of excess capacity. Expectations of future price increases (due to anticipated future demand for housing services) cause the current supply to increase, creating a temporary vacancy. We implement this intuition in a structural vector autoregression with sign restrictions and explore the effects of price expectations in the U.S. housing market. We find that price expectation shocks were a prime factor explaining the 1996-2006 boom, particularly in the Sand States. Expectation shocks at the boom's peak reflected implausible growth expectations and reversed during the bust.
| Author | : Daniel L. Tortorice |
| Publisher | : |
| Total Pages | : 37 |
| Release | : 2015 |
| Genre | : |
| ISBN | : |
Download Long Run Expectations, Learning and the U.S. Housing Market Book in PDF, ePub and Kindle
This paper examines key facts about the U.S. housing market. The price to rent ratio is highly volatile and significantly autocorrelated. Returns on housing are positively autocorrelated. The price to rent ratio is negatively correlated with future returns on housing and future rent growth. Finally, housing returns exhibit significant time varying volatility. I show that a benchmark rational expectations general equilibrium asset pricing model is inconsistent with these facts. I modify the model in two ways to improve its fit with the data. First, I allow for pricing frictions so prices adjust slowly to their fundamental value. Second, I assume the agent does not know if housing fundamentals, captured by rental flows, are stationary or non-stationary and has changing beliefs depending on how well each model fits the current data. I find that these modifications allow the model to increase the volatility of the price to rent ratio and to match the autocorrelation of housing returns. The price to rent ratio then negatively forecasts returns and rent growth. Finally the model generates time varying volatility consistent with the data.
| Author | : Thomas Sowell |
| Publisher | : Basic Books |
| Total Pages | : 258 |
| Release | : 2010-02-23 |
| Genre | : Business & Economics |
| ISBN | : 0786747552 |
Download The Housing Boom and Bust Book in PDF, ePub and Kindle
This is a plain-English explanation of how we got into the current economic disaster that developed out of the economics and politics of the housing boom and bust. The "creative" financing of home mortgages and the even more "creative" marketing of financial securities based on American mortgages to countries around the world, are part of the story of how a financial house of cards was built up -- and then suddenly collapsed. The politics behind all this is another story full of strange twists. No punches are pulled when discussing politicians of either party, the financial dangers they created, or the distractions they created later to escape their own responsibility for what happened when the financial house of cards in the financial markets collapsed. What to do, now that we are in the midst of an economic disaster, is yet another story -- one whose ending we do not yet know, but one whose outlines and implications are explored to reveal some surprising and sobering lessons.
