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Housing Price Dynamics 2

Paper Session

Sunday, Jan. 5, 2025 1:00 PM - 3:00 PM (PST)

San Francisco Marriott Marquis, Nob Hill B
Hosted By: American Real Estate and Urban Economics Association
  • Chair: Paul Anglin, University of Guelph

Fiscal Stimulus Payments, Housing Demand, and House Price Inflation

Leming Lin
,
University of Pittsburgh

Abstract

This paper studies the impact of the fiscal stimulus payments on the housing market during the 2020-2021 COVID-19 pandemic. Exploiting the variation in the share of local population eligible for the historic $900 billion economic impact payments and expanded child tax credits, the paper finds that house prices grew significantly faster in areas where residents received a larger amount of stimulus payments. This relationship cannot be explained by changes in non-transfer income, population growth or migration, exposure to the shift to remote work, pre-2020 per-capita income or house price levels, or differential housing trends. The estimates indicate that a 10 percentage-point increase in the share of population eligible for the full $3,200 payments is associated with a 1--2% increase in house prices from 2019 to 2021. A regression kink design exploiting the phase-out of payments above specific income thresholds shows a positive effect of stimulus payments on homeownership rates. Overall, these results highlight an important housing channel in the transmission of fiscal stimulus payments.

The Effect of Targeted Subsidies on the Location Choice of Housing Voucher Recipients: Evidence from the Small-Area Fair Market Rents

Eunjee Kwon
,
University of Cincinnati
Michael Eriksen
,
Purdue University
Guoyang Yang
,
University of Cincinnati

Abstract

This paper investigates the scalability of the Small Area Fair Market Rent (SAFMR) policy, a reform to the Housing Choice Voucher (HCV) program designed to reduce poverty concentration by adjusting subsidy caps based on ZIP code-level rents. The SAFMR policy, initially piloted in the Dallas metropolitan area, successfully reduced poverty rates among voucher recipients by enabling moves to lower-poverty neighborhoods. Using HUD administrative data on 280,000 voucher recipients from 2017 to 2019, we extend this analysis to evaluate the SAFMR mandate across 15 metropolitan areas, assessing its broader applicability. Our findings reveal that new voucher recipients are significantly more likely to move to lower-poverty neighborhoods, while existing recipients exhibit stable mobility rates of less than 10% annually. Among movers, we observe reduced exposure to poverty, though racial disparities persist. Notably, White households are twice as likely to move to lower-poverty neighborhoods, reinforcing patterns of racial segregation. We find that local factors significantly influence policy effectiveness across Metros, emphasizing the need to consider contextual differences when scaling housing interventions. This research underscores the critical need to address mobility constraints among low-income populations as a determinant of policy success and offers valuable insights into the challenges of replicating the successes of an experiment across diverse settings.

Persistence of Market Conditions in Real Estate Markets

Paul Anglin
,
University of Guelph

Abstract

We show how using commonly reported measures of real estate market conditions can improve the accuracy of price predictions. The standard model of competitive markets asserts that excess demand causes price(s) to adjust to an equilibrium with little delay. In an illiquid market, such as the market for real estate, attaining an equilibrium may take significantly more time. That fact implies that data on market conditions could be informative. A better understanding of the adjustment process in a real estate market could also lead to buying or selling strategies which are better informed.

This paper has two parts. The first part uses different types of models to focus on the conceptual distinction between an exogenous variable and an endogenous variable. Based on this distinction, we offer six hypotheses on why the effects of market conditions might differ between cities. The second part uses vector auto-regression to study the persistence of several variables, with a particular focus on an inflation-adjusted price index and two popular measures of excess demand (the ratio of sales to new listings and “Months of Inventory”). Using monthly data on residential real estate markets in 31 Canadian cities, we find that excess demand affects prices contemporaneously, that changes in measured excess demand persist for a significant period of time and that they affect prices with a lag. We also find evidence of a statistically significant feedback effect, in some cities, from changes in prices to the measures of excess demand.

A Tale of Two U.S. House Price Booms

Anthony Murphy
,
Federal Reserve Bank of Dallas
John Duca
,
Oberlin College
John Muellbauer
,
University of Oxford

Abstract

Real US house prices boomed to similar extents in both the early 2000s and in the years following the outbreak of the COVID-19 pandemic, albeit for different reasons. The former boom was set in motion by higher demand arising from a combination of low interest rates and laxer mortgage credit standards. In contrast, the more recent boom arose from higher housing demand - stemming from lower mortgage interest rates and a pandemic-related rise in the demand for space and increased work-from-home (WFH) - pressing up against a less elastic supply of housing. The mortgage rate “lock in” effect reduced the supply of existing homes for sale. In both episodes, extrapolative house price expectations amplified the runup in prices. e establish these results using a house price-to-rent framework and quarterly data spanning four decades. We estimate the determinants of long-run house prices and their dynamic behavior over several business cycles. We find that while the much of the house price increases this decade was induced by earlier low interest rates which have since rebounded, the rise in WFH and mortgage rate lock-in effects prevented much of the prior run-up from unwinding. We estimate that WHF and mortgage rate lock-in effects boosted the house price-to-rent ratio by about 10 percent and up to 8 percent respectively in the long-run. The model results suggest that the deviation of the house price-to-rent ratio from its longer-run, fundamental value is small.

Discussant(s)
Yichen Su
,
Southern Methodist University
Diana Mok
,
University of Guelph
Chongyu Wang
,
Florida State University
George Galster
,
Wayne State University
JEL Classifications
  • R0 - General