Academic literature on the topic 'Housing economics'

Booms in house prices are usually followed by busts. This pattern is called "mean reversion." Mean reversion in housing markets has historically coincided with economic recessions across the world. Chapter 1 establishes mean reversion in U.S. data, and attempts to explain it using the dynamics of wages in cities. Chapter 2 takes a different approach. It models mean reversion resulting from speculation and uncertainty. This model explains why strong mean reversion in prices occurs in cities where it is easy to build houses, a phenomenon that Chapter 1 cannot explain. Chapter 3 takes the spirit of Chapter 2 and applies it to the optimal design of the income tax.<br>Economics

This dissertation presents four essays. The first chapter builds a real-options, term structure model of the firm incorporating stochastic volatility and endogenous default to shed new light on the value premium, financial distress, momentum, and credit spread puzzles. The paper uses recently developed methodologies based on asymptotic expansions to solve the model. The second chapter, coauthored with Adam Guren, presents a model that shows how foreclosures can exacerbate a housing bust and delay the housing market's recovery. Quantitatively, the model successfully explains aggregate and retail price declines, the foreclosure share of volume, and the number of foreclosures both nationwide and across MSAs. The third and fourth chapters, coauthored with Stephen W. Salant and Jason Winfree, discuss the economics of untraceable experience goods in a variety of settings. The third chapter drops the "small country" assumption in the trade literature on collective reputation and shows how large exporters like China can address severe problems assuring the quality of its exports. The fourth chapter demonstrates how regulations in the formal sector of developing countries can lead to a quality gap between formal and informal sector goods. It moreover investigates how changes in regulation affect quality, price, aggregate production, and the number of firms in each sector.<br>Economics

Thesis: Ph. D., Massachusetts Institute of Technology, Department of Economics, 2015.<br>Title as it appears in MIT Commencement Exercises program, June 5, 2015: Essays on housing and credit markets. Chapter 2 co-authored by François Koulischer. Cataloged from PDF version of thesis.<br>Includes bibliographical references (pages 117-125).<br>This thesis consists of three chapters on housing and credit markets. Chapter 1 tests the "housing lock hypothesis": the conjecture that homeowners with limited or negative home equity, low levels of financial assets and restricted opportunities to borrow are unable to move. It employs unique, administrative population data on residential location, home-ownership, family structure, and household balance sheets from the Netherlands. The rapid rise in Dutch house prices during the 1995- 2008 period, and their substantial decline thereafter, has generated large variation in the home equity of buyers who bought homes a few years apart. Buyers in the cohorts that purchased homes around the peak have higher Loan-To-Value (LTV) ratios than earlier buyers, and also have much lower mobility rates in every year after purchase. A decline in home equity is associated with large and statistically significant reductions in household mobility. A rise in the LTV ratio from 90 to 115% is associated with a 30% decline in household mobility. The reduction in mobility is observed both within and across labor markets. The mobility effects of falling home equity are substantially larger for households with low financial asset holdings. These results emerge from comparisons of mobility rates from different purchase cohorts after removing time and region effects, as well as from an analysis of homebuyers whose purchase timing was determined by arguably exogenous changes in family structure. Since Dutch mortgages are full recourse, which rules out strategic default behavior, the findings provide new support for the "housing lock hypothesis". Chapter 2, co-authored with François Koulischer, studies the role of collateral in liquidity provision by central banks. Should central banks lend against low quality collateral? We characterize efficient central bank collateral policy in a model where a bank borrows from the interbank market or the central bank. Collateral has favorable incentive effects but is costly to transfer to lenders who value the collateral less because of imperfect collateral quality. We show that a fall in the quantity or the quality of the bank's collateral can increase interest rates in the economy even with a constant policy rate. A looser central bank collateral policy can reduce the spread, alleviate the credit crunch and increase output. Chapter 3 studies the effects of LTV limits, Payment-To-Income (PTI) limits and the mortgage interest deduction on mortgage debt exploiting a series of policy changes in the Netherlands. As intended, regulatory loan limits reduce mortgage leverage ratios and they also induce bunching at the loan limits. Loan limits and restrictions of the mortgage interest deduction trigger large declines in mortgage volumes. The leverage and volume responses are larger for young, borrowing-constrained households. The repeal of the mortgage interest deduction for non-amortizing mortgages decimates the market for non-amortizing mortgages. The PTI tightening is also associated with a substantial rise in the fraction of mortgages that have very short periods during which the interest rate is fixed. This unintended risk-shifting pattern to quasi- adjustable-rate mortgages (ARM) may increase income risk. The reform of the mortgage interest deduction, which boosts amortization, is also associated with a significant decline in principal amounts at origination. These findings highlight the distributional effects as well as the unintended potential consequences of macroprudential and fiscal policies aiming to reduce mortgage debt. This thesis tries to cast light on the effects of shocks to the value of housing and other types of collateral on the broader economy. This work suggests that the combination of imperfections in credit markets and shocks to asset prices can exert a substantial, non-linear and heterogeneous influence on household and firm outcomes, such as residential mobility (Chapter 1) and business investment (Chapter 2). This thesis also investigates the role for monetary, macroprudential and fiscal policies to alleviate or prevent the negative spill-over effects to the real economy, both before (Chapter 3) as well as after (Chapter 2) the occurrence of financial shocks.<br>by Daan Struyven.<br>Chapter 1. Chapter 2: Chapter 3. The Housing lock : Dutch evidence on the impact of negative home equity on household mobility -- Central Bank liquidity provision and collateral quality -- effects of macroprudential and fiscal policy on mortgage debt : evidence from the Netherlands.<br>Ph. D.

<p>This paper examines the relationship between housing investments and economic growth. Through a literature review five different hypotheses are analysed to examine the effects of housing investments on economic growth. The studied effects include; direct effects, counter-cyclical effects, price effects and productivity effects through reduced mismatch between housing and labour markets, and finally effects on the productivity of workers. The conclusion is that the direct effects are only short term and the existence of counter-cyclical effects is doubtful. For the price effects and the effects on productivity there are less empirical evidence, but the effects are still considered significant. Keywords: housing investments, new construction, economic growth, effects 2</p>

Thesis (Ph.D.)--Massachusetts Institute of Technology, Dept. of Economics, 2002.<br>Includes bibliographical references (p. 120-124).<br>This dissertation consists of three essays on the local regulation of housing supply and its influence on house price volatility. I begin by describing the local supply-side dynamics of housing price and stock in each of 47 U.S. metropolitan area housing markets using a unique, market-level panel dataset. The data are analyzed with a conditional vector-autoregression, which characterizes the dynamic responses of price and stock to an increase in housing demand caused by a shift in employment. These response time-paths are used to create measures of short-, medium- and long-run supply elasticities. Both the time-paths and the implied elasticities vary widely. I use several area characteristics to explain the variation in the supply elasticity measures across metropolitan areas. The results suggest that governments with a greater incentive to regulate housing have a slower house-price response. This directly contradicts the predictions of the existing land-use literature. In order to explain the result, William C. Wheaton and I formalize a general equilibrium theory of a housing market whose local governments determine house price by regulating their supplies of land. The regulatory decisions are made by current residents who already own housing, but the impact of these decisions on prices is determined by new entrants who must purchase housing. The choice of how much to regulate is shown to vary by town size, existing town density, and the amount of open land currently available for development. This is broadly consistent with the results of recent empirical research.<br>(cont.) I also find that the predictions of this theory are directly borne out in data on land-use restrictions across much of Massachusetts. Two types of residential land-use regulation are considered: regulation that restricts the share of land on which housing can be built, and regulation that restricts housing density on a given plot of land. I find evidence suggesting that the two types of regulation may enter the optimization problem of Massachusetts towns very differently, and that towns may regulate new housing more strictly than they did old housing.<br>by Bengte Evenson.<br>Ph.D.

Thesis (Ph.D.)--Massachusetts Institute of Technology, Dept. of Economics, 2002.<br>Includes bibliographical references (p. 113-117).<br>Chapter 1 For most US households, labor income is the most important source of wealth and housing is the most important risky asset. A natural intuition is thus that households whose incomes covary relatively strongly with housing prices should own relatively little housing. Under plausible assumptions on preferences and distributions, this result holds theoretically. Empirically, I find a significant effect: among US households, a one standard deviation increase in income-house price covariance is associated with a decrease of approximately $25,000 in the value of owner occupied housing. This empirical result implies greater cognizance of the interaction between labor income and asset risk on the part of households than suggested by most analyses of stock market behavior. The analysis also suggests that many homeowners enter financial markets in a riskier position than typically thought, and reinforces the intuitive appeal of proposals for market- or tax-based risk sharing in housing prices. Chapter 2 extends the theory of annuitization with no bequest motive in two directions. First, we derive sufficient conditions, in a more general setting than Yaari (1965), under which complete annuitization is optimal, and weaker conditions under which partial annuitization is better than zero annuitization. Second, we explore how incremental and complete annuitization affect consumer welfare in these more general conditions. When markets are complete, all savings are optimally annuitized as long as there is no bequest motive and annuitized assets have greater returns than conventional assets.<br>(cont.) Consumers' utility need not satisfy intertemporal additive separability nor the expected utility axioms, and annuities need not be actuarially fair. The result is weakened if annuities markets are incomplete, so that there are some assets which do not exist in annuitized form: as long as trade occurs all at once and consumption is positive in every state of nature, a small degree of annuitization is better than no annuitization. When conventional asset markets are incomplete, if annuities are illiquid, then it is possible that no savings are annuitized. We present numerical calculations of the financial benefit and optimal degree of annuitization for consumers with standard CRRA preferences, and compare these results to results where otherwise identical consumers have utility that depends both on present consumption and a standard of living to which they have grown accustomed. In our specification, the effect of adding intertemporal dependence hinges on the size of initial standard of living relative to resources. Chapter 3 addresses the measurement of income sorting and the attribution of observed sorting to different causes. In terms of measurement, I show that a standard decomposition of variance of household income into within jurisdiction and between jurisdiction components understates sorting in the presence of measurement error. Using 1990 US Census data, I find that adjusting for this error approximately doubles the estimated extent of sorting. On average, across all US metropolitan areas (MSAs) I find that approximately ten percent of the variation in household income can be explained by differences across jurisdictions ...<br>by Thomas Davidoff.<br>Ph.D.

Multiple housing affordability indexes are used to measure and assess housing affordability. Each index has its own definition of affordability, causing varying viewpoints on what is to be considered affordable or unaffordable. Four indexes were used in this study: two from the Department of Housing and Urban Development (HUD), one from the National Association of Realtors (NAR), and the last from the National Low Income Housing Coalition. The indexes were applied to Census data to assess the housing affordability situation of both homeowners and renters in the census tracts of Cache County, Utah. The measures together show distinct differences in the housing markets throughout the county. The study provides implications for housing counselors, educators, lenders, and policy makers, and provides suggestions for preventing housing crisis, including the benefits of the residual income approach for determining housing affordability