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Working Paper
Policy Uncertainty and Bank Mortgage Credit
We document that banks reduce supply of jumbo mortgage loans when policy uncertainty increases as measured by the timing of US gubernatorial elections in banks' headquarter states. The reduction is larger for more uncertain elections. We utilize high-frequency, geographically granular loan data to address an identification problem arising from changing demand for loans: (1) the microeconomic data allow for state/time (quarter) fixed effects; (2) we observe banks reduce lending not just in their home states but also outside their home states when their home states hold elections; (3) we ...
Journal Article
Brewing bubbles: how mortgage practices intensify housing booms
Even before the Great Recession, housing market bubbles have been associated with severe financial crises around the world. Why do these booms and busts occur? Leonard Nakamura explains that part of the answer may lie with how mortgage lending practices appear to respond to rising and falling house prices in somewhat unexpected ways.
Discussion Paper
Recent Trends in Fifth District Housing Market Indicators
There is evidence that the tight housing markets of the past few years are starting to loosen, with increased supply and falling prices. However, many Americans still struggle to buy a home. Between the fall of 2020 and the summer of 2022, home price growth accelerated in the United States and in all Fifth District states after being relatively steady for a decade. Using the CoreLogic Home Price Index, price increases were most dramatic in North Carolina and South Carolina, where year-over-year increases reached historic highs of 25 percent. While price increases remain high relative to the ...
Journal Article
The Limited Supply of Homes
Jordan Rappaport finds that a limited supply of single-family homes will continue to constrain home sales and put upward pressure on home prices over the next few years.
Journal Article
Opinion: Unique Challenges in the Housing Market
The Fed's monetary tightening over the past year has had an immediate effect on the housing market. The average interest rate on a 30-year fixed-rate mortgage more than doubled from about 3 percent at the end of 2021 to around 7 percent by the fall of 2022. Higher mortgage rates — so long as inflation is not expected to stay high — raise the real cost of borrowing to buy a new home, so it is no surprise that new home sales declined throughout 2022. But if the Fed didn't act to bring inflation down, we could expect lenders to charge high rates simply to break even in real terms. The ...
Journal Article
The demographic shift from single-family to multifamily housing
The crash of the U.S. housing market triggered the worst U.S. recession since the 1930s. Beginning in late 2009, multifamily construction rebounded strongly. Beginning in mid-2011, single-family construction began to rebound as well. But during the first half of 2013, growth of both types of construction paused. Rappaport examines the demographic forces shaping demand for residential construction. At the end of 2012, the number of occupied single-family housing units was moderately below its demographic trend level and the number of occupied multifamily housing units was considerably below ...
Working Paper
Housing Market Value Impairment from Future Sea-level Rise Inundation
Sea level rise will pose increased risks to U.S. coastal real estate markets in the coming decades, though the direct economic costs depend on the severity and uncertainty within climate-change scenarios.
Working Paper
How Do Housing Markets Affect Local Consumer Prices? – Evidence from U.S. Cities
Analyzing city-level retail price data for a variety of consumer products, we find that house price changes lead local consumer price changes, but not vice versa. The transmission of the house price changes differs substantially across locations and products. It also hinges on the nature of housing market shocks; housing supply shocks propagate through the cost-push channel via local cost and markup effects, while housing demand shocks transmit through conventional wealth and collateral effects. Our findings suggest that housing may exert greater impacts on the local cost-of-living and ...
Journal Article
New from the Richmond Fed’s Regional Matters blog
Recap of recent Regional Matters Blog posts.
Journal Article
Comparing Measures of Rental Prices Can Inform Monetary Policy
Shelter makes up one-third of the Consumer Price Index (CPI) and is important to understanding inflation developments. Comparing two measures of shelter prices—the official U.S. Bureau of Labor Statistics (BLS) dataset and the Zillow rental price index—shows that the Zillow series leads the BLS series by about six to 10 months. Changes in the Zillow series should eventually be reflected in the BLS data, so any positive gap between the two suggests that tighter monetary conditions may be needed to lower CPI inflation.