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Working Paper
Understanding house price index revisions
Elul, Ronel; Silverstein, Joseph M.; Stark, Tom (2014-12-22)
Residential house price indexes (HPI) are used for a large variety of macroeconomic and microeconomic research and policy purposes, as well as for automated valuation models. As is well known, these indexes are subject to substantial revisions in the months following the initial release, both because transaction data can be slow to come in, and as a consequence of the repeat sales methodology, which interpolates the effect of sales over the entire period since the house last changed hands. We study the properties of the revisions to the CoreLogic House Price Index. This index is used both by ...
Working Papers , Paper 14-38

Newsletter
Why Housing Has Been So Strong, but Might Not Be for Long
Amromin, Gene; Fisher, Jonas D. M.; Veracierto, Marcelo (2023-10)
The current monetary policy tightening cycle has seen the fastest increases in the fed funds rate in more than 40 years. While not all tightening cycles have led to significant increases in mortgage rates (e.g., the 1988, 2016, and 2004 cycles), this time around mortgage rates have increased by close to 400 basis points (bps) in the first seven months since lift off (see figure A1 in the appendix). In this Chicago Fed Letter, we describe how this increase has shaped (and is still shaping) the dynamics of the housing sector.
Chicago Fed Letter , Volume no 485 , Pages 7

Report
Using home maintenance and repairs to smooth variable earnings
Tracy, Joseph; Gyourko, Joseph (2003-05-01)
Recent research indicates that the marked increase in U.S. income inequality over the last twenty-five years has not been matched by a similar increase in consumption inequality. This paper examines the role of saving/dissaving in a house as a vehicle for consumption smoothing. Data from the American Housing Survey show that expenditures on home maintenance and repairs are economically significant, amounting to roughly $1,750 per household each year. This figure is comparable to the labor literature estimates that put households' average annual transitory income variance at about $2,200. Our ...
Staff Reports , Paper 168

Newsletter
Higher Home Prices and Higher Rates Mean Bigger Affordability Hurdles for the U.S. Consumer
Gillet, Max; Hull, Cindy E. (2023-08)
In the U.S., homeownership is often described as part of the “American dream,” a way for consumers to accumulate wealth and gain other economic benefits. Almost two out of three U.S. households own the home they live in, a relatively stable amount over the last decade. Buying a home is usually the largest investment that a consumer will make, and the purchase price usually far exceeds what most can afford out of their current savings. In 2022, roughly 70% of home purchases were made with the help of mortgage financing.
Chicago Fed Letter , Volume no 481

Working Paper
Supply Shock Versus Demand Shock: The Local Effects of New Housing in Low-Income Areas
Reed, Davin; Mast, Evan; Asquith, Brian (2020-02-19)
We study the local effects of new market-rate housing in low-income areas using microdata on large apartment buildings, rents, and migration. New buildings decrease nearby rents by 5 to 7 percent relative to locations slightly farther away or developed later, and they increase in-migration from low-income areas. Results are driven by a large supply effect—we show that new buildings absorb many high-income households—that overwhelms any offsetting endogenous amenity effect. The latter may be small because most new buildings go into already-changing areas. Contrary to common concerns, new ...
Working Papers , Paper 20-07

Working Paper
The Closing of a Major Airport: Immediate and Longer-Term Housing Market Effects
Coughlin, Cletus C.; Ross, Stephen L.; Cohen, Jeffrey P.; Crews, Jonas C. (2021-01-19)
The closing of a busy airport has large effects on noise and economic activity. Using a unique dataset, we examine the effects of closing Denver’s Stapleton Airport on nearby housing markets. We find evidence of immediate anticipatory price effects upon announcement, but no price changes at closing and little evidence of upward trending prices between announcement and closing. However, after airport closure, more higher income and fewer black households moved into these locations, and developers built higher quality houses. Finally, post-closing, these demographic and housing stock changes ...
Working Papers , Paper 2020-001

Working Paper
Monetary Policy, Hot Housing Markets and Leverage
Ungerer, Christoph T. (2015-05-22)
Expansionary monetary policy can increase household leverage by stimulating housing liquidity. Low mortgage rates encourage buyers to enter the housing market, raising the speed at which properties can be sold. Because lenders can resell seized foreclosure inventory at lower cost in such a hot housing market, ex-ante they are comfortable financing a larger fraction of the house purchase. Consistent with this mechanism, this study documents empirically that both the housing sales rate and loan-to-value ratios increase after expansionary monetary policy. Calibrating a New Keynesian ...
Finance and Economics Discussion Series , Paper 2015-48

Discussion Paper
Climate Change and Consumer Finance: A Very Brief Literature Review
Canals-Cerda, Jose J.; Roman, Raluca (2021-10-06)
Extant research shows that climate change can impose significant costs on consumers’ wealth and finances. Both sea-level rise and flooding from hurricane events led to high price declines and thus wealth loss for homes in coastal areas or in disaster-struck areas, with effects lingering for a number of years in some cases. In terms of consumer finance, while the average consumer is not always significantly negatively affected by a disaster, the vulnerable groups (those with low credit scores and who are low income) can be severely affected, experiencing higher rates of delinquencies and ...
Consumer Finance Institute discussion papers , Paper 21-04

Working Paper
The Mortgage Prepayment Decision: Are There Other Motivations Beyond Refinance and Move?
Maingi, Ramain Quinn; Hall, Arden (2019-10-21)
Borrowers terminate residential mortgages for a variety of reasons. Prepayments and defaults have always been distinguishable, and researchers have recently distinguished between prepayments involving a move and other prepayments. But these categories still combine distinct decisions. For example, a borrower may refinance to obtain a lower interest rate or to borrow a larger amount. By matching mortgage servicing and credit bureau records, we are able to distinguish among several motivations for prepayment: simple refinancing, cash-out refinancing, mortgage payoff, and move. Using multinomial ...
Working Papers , Paper 19-39

Working Paper
The Closing of a Major Airport: Immediate and Longer-Term Housing Market Effects
Coughlin, Cletus C.; Ross, Stephen L.; Cohen, Jeffrey P.; Crews, Jonas C. (2020-01-08)
The closing of a busy airport has large effects on noise and economic activity. Using a unique dataset, we examine the effects of closing Denver’s Stapleton Airport on nearby housing markets. We find evidence of immediate anticipatory price effects upon announcement, but no price changes at closing likely because closing was widely anticipated. Further, after airport closure, high income and white households moved into these locations and developers upgraded the quality of houses being built. Finally, post-closing, these demographic and housing stock changes had substantial effects on ...
Working Papers , Paper 2020-001

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