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Marriott Marquis, La Costa
Housing Markets and Household Heterogeneity
Saturday, Jan. 4, 2020 10:15 AM - 12:15 PM (PDT)
- Chair: Kaiji Chen, Emory University
Investors and Housing Affordability
AbstractThis paper studies the impact of housing investors on the dynamics of housing affordability, after the Global Financial Crisis. Using an instrumental variable approach, we find that the investors' purchases in the U.S. MSAs, increase the price-to-income ratio, especially in the bottom price-tier of the market, and in areas with large supply restrictions. However, these effects are short-lived. Investors cause a significant supply response, as they increase granting of new building permits. In the medium-term, investors' purchases lead to reductions in prices and improved affordability. These findings should be considered when designing policy regulations.
The Persistent Employment Effects of the 2006-09 United States Housing Wealth Collapse
AbstractWe show that the housing wealth collapse of 2006-09 had a persistent impact on employment across counties in the US. In particular, localities that had a larger loss in housing net-worth during that period had more depressed employment as late as 2016, without a commensurate population response. The use IV’s and controls to identify the causal impact of the wealth shock amplifies those results, leading to an estimate that a 10 percent change in housing net-worth between 2006 and 2009 causes a 4.5 percent decline in local employment by 2016, as compared with a 2006 baseline. We do not find a long-term causal impact of the shock on wages. Sectoral results indicate, however, that the results are unlikely to be purely a result of persistently low demand, since, contrary to the short-run effects, the effect over the longer horizon is less concentrated in the non-tradables sectors and is instead more prominent in the high-skilled services sector.
Aggregate and Distributional Impacts of Housing Policy: China's Experiment
AbstractWhat's the role of credit conditions in housing booms and busts and what are the distributional consequences of housing booms and busts across households of different characteristics? In this paper, we take China's recent changes in housing policy as an experiment to address these two key issue. During 2014Q4-2016Q3, China relaxed its housing policies by reducing the minimum down payment ratio of non-primary houses from 60-70 percent to 30 percent. By exploiting two unique micro-level data sets, we find that that this policy change induced a significant increase in mortgage credit demand among high-educated middle-aged households, while crowding out mortgage credit to young households. Moreover, consumption growth by middle-aged high-educated households slowed down following this policy change. To quantify the aggregate and distributional impacts of this policy change, we construct an overlapping-generations economy with household heterogeneity and calibrate it to match various aggregate and cross-sectional moments of China. Our policy experiment suggests that a cut in the minimum down payment ratio for non-primary houses involves a self-enforcing effect on housing demand via equilibrium housing price: a reduction in the down payment ratio for non-primary housing triggers an initial housing price increase. This, in turn, generates capital gains for existing homeowners when the policy change and allows them to switch to a larger house by overcoming the credit constraint for housing investment. Such a process is self-enforcing via the equilibrium housing prices due to the interaction between stronger housing demand and higher housing price.
- D1 - Household Behavior and Family Economics