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Working Paper
Housing Demand and Remote Work
What explains record U.S. house price growth since late 2019? We show that the shift to remote work explains over one half of the 23.8 percent national house price increase over this period. Using variation in remote work exposure across U.S. metropolitan areas we estimate that an additional percentage point of remote work causes a 0.93 percent increase in house prices after controlling for negative spillovers from migration. This cross-sectional estimate combined with the aggregate shift to remote work implies that remote work raised aggregate U.S. house prices by 15.1 percent. Using a model ...
Journal Article
Credit Conditions in the Pandemic Mortgage Market
The recent rapid rise in house prices has raised some questions about the potential risk to broader financial stability. However, credit quality in the mortgage market appears to be very high, and lending standards tightened in early 2020. While low interest rates increased the demand for refinancing, evidence from large nonconforming loans shows that credit supply contracted sharply in March 2020 and remained tight through the early pandemic period. The shift in credit supply suggests that lenders adjusted their standards to mitigate some risk in the housing market.
Working Paper
Supply Constraints Do Not Explain House Price and Quantity Growth Across U.S. Cities
The standard view of housing markets holds that differences in the flexibility of local housing supply shaped by factors like geography and regulation—explain differences in how house price and quantity growth respond to rising demand across U.S. cities. However, from 2000 to 2020, we find that higher income growth predicts the same growth in house prices, housing quantity, and population regardless of a city’s estimated housing supply elasticity. We find the same results when we examine rents, expand the sample to 1980 to 2020, use different elasticity measures, use per capita income or ...
Journal Article
Pandemic-Era Demand Squeezed Housing Inventories
The housing market experienced historically low levels of inventory along with rapid price growth in the two years following the onset of the pandemic. Analysis of national and county-level housing data suggests this price surge was fueled by heightened demand rather than low supply. The inflow of new listings remained at pre-pandemic levels, but the outflow due to sales was unusually high, which fed into the low inventory. By mid-2022, rising mortgage rates moderated demand, allowing inventory levels to return to pre-pandemic trends.
Working Paper
Dynastic Home Equity
Using a nationally-representative panel of consumer credit records for the US from 1999 to 2021, we document a positive correlation between child and parent homeownership. We propose a new causal mechanism behind this relationship: parents extract home equity to help finance their child’s home purchase. To identify the mechanism, we use fixed effect, event study, local projection and matching methods. We find that children whose parents extract equity: (i) are 60-80% more likely to become homeowners; (ii) have lower leverage at origination; and (iii) buy higher-valued homes and at a younger ...
Working Paper
Quality, Inequality and Understanding Housing Markets
Most housing research relies on a single-margin model where a single housing price relates to a single housing quantity. We generalize this approach by introducing income inequality and housing quality. Two important challenges to studying housing supply (and demand) emerge: First, there is no singular housing supply function, instead there is a continuum of unit-supply functions indexed by quality. This implies that supply elasticity estimates are local average treatment effects (LATEs), not structural elasticities. Second, spillovers common in spatial settings may preclude even the LATE ...
Working Paper
Does Greater Inequality Lead to More Household Borrowing? New Evidence from Household Data
Using household-level debt data over 2000-2012 and local variation in inequality, we show that low-income households in high-inequality regions (zip-codes, counties, states) accumulated less debt (relative to their income) than low-income households in lower-inequality regions, contrary to the prevailing view. Furthermore, the price of credit is higher and access to credit is harder for low-income households in high-inequality versus low-inequality regions. Lower quantities combined with higher prices suggest that the debt accumulation pattern by household income across areas with different ...
Journal Article
Where Is Shelter Inflation Headed?
Shelter inflation has remained high even as other components of inflation have fallen. However, various market indicators, including house prices and rents, suggest that the housing market has slowed significantly with the rise in interest rates. Forecasting models that combine several measures of local shelter and rent inflation can help explain how recent trends might affect the path of future shelter inflation. The models indicate that shelter inflation is likely to slow significantly over the next 18 months, consistent with the evolving effects of interest rate hikes on housing markets.
Working Paper
Real Effects of Nominal Interest Rates
Nominal interest rates have real effects. Residential mortgages and other real world debt contracts require a sequence of constant nominal payments. Combined with payment-to-income constraints, these nominal payments force borrowers to take on less debt when nominal interest rates rise, regardless of the behavior of the real interest rate. Survey data shows that conditional on the real rate, higher nominal mortgage interest rates reduce home buying sentiment. And increases in nominal mortgage rates reduce mortgage origination more in cities where payment to-income constraints are more likely ...
Working Paper
Credit Supply, Prices, and Non-price Mechanisms in the Mortgage Market
I use an episode of relatively tight credit supply in the jumbo mortgage market to quantify the importance of price and non-price credit supply mechanisms in explaining changes in borrowing. Following market disruptions in March 2020, borrowers with jumbo loans saw significantly tighter credit supply conditions relative to borrowers with conforming loans. As a result, jumbo borrowers were 50 percent less likely to refinance and when they refinanced they borrowed 4-6 percent less than counterfactual borrowers facing looser credit conditions. The reduction in borrowing may have been caused by ...