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Journal Article
Forecasting growth over the next year with a business cycle index
The current economic recovery is proceeding at a tepid pace despite massive federal fiscal stimulus and extremely low interest rates. Forecasts derived from business cycle indicators produced by the Chicago and Philadelphia Federal Reserve Banks predict that real U.S. GDP growth through the first half of 2011 will remain at or below potential. If these forecasts prove accurate, then the historical relationship between real GDP growth and the labor market suggests that the unemployment rate could rise by as much as 0.5 percentage point during this period.
Journal Article
Cap rates and commercial property prices
Commercial real estate capitalization rates have been found to be good indicators of expected returns in commercial properties. Recent declines in these cap rates appear to be signaling a commercial real estate rebound, indicating improved investor expectations of price growth in the market. Movements in national cap rates are the predominant drivers of changes in cap rates in local markets. Therefore, the anticipated commercial real estate rebound is likely to be widespread across many metropolitan areas.
Working Paper
Mortgage Choice in the Housing Boom: Impacts of House Price Appreciation and Borrower Type
The U.S. housing boom during the first part of the past decade was marked by rapid house price appreciation and greater access to mortgage credit for lower credit-rated borrowers. The subsequent collapse of the housing market and the high default rates on residential mortgages raise the issue of whether the pace of house price appreciation and the mix of borrowers may have affected the influence of fundamentals in housing and mortgage markets. This paper examines that issue in connection with one aspect of mortgage financing, the choice among fixed-rate and adjustable-rate mortgages. This ...
Journal Article
Drivers of mortgage choices by risky borrowers
During the past decade?s housing boom, borrowers with lower credit ratings were more likely than higher-rated borrowers to choose adjustable-rate mortgages. This raises the question of whether, amid rapidly rising house prices, lower-rated borrowers paid less attention to loan pricing and interest-rate-related factors. However, even accounting for house price appreciation, research shows these borrowers were as, if not more, responsive as higher-rated borrowers to changes in interest-rate-related fundamentals. Their tendency to choose adjustable-rate mortgages is consistent with mortgage ...
Working Paper
Mortgage Choice: Interactive Effects of House Price Appreciation and Mortgage Pricing Components
Research has shown evidence of a link between house price appreciation and the selection of mortgage financing options: Higher appreciation is associated with higher take-up rates for adjustable-rate mortgages relative to fixed-rate mortgages. Research also finds that mortgage interest rates and their underlying components are important determinants of take-up rates among mortgage financing options. In this paper we show that house price appreciation can have important interactive effects with those other determinants of mortgage financing outcomes. We focus on the period from 2000 to 2007, ...