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Working Paper
Late Payment Fees and Nonpayment in Rental Markets, and Implications for Inflation Measurement: Theoretical Considerations and Evidence
Janson, Wesley; Verbrugge, Randal J. (2023-11-06)
Accurate rent measurement is essential for constructing a consumer price index (CPI) and for measuring household welfare. Late payment fees and nonpayment of rent are common components of rental expenditures and thus belong in CPIs. Late payment fees are often excluded; we offer a novel critique. In the US CPI, nonpayment is ostensibly included, but, we show, severely undermeasured. Moreover, the manner of its inclusion renders the CPI extremely sensitive to nonpayment variations; we show how to fix this. Nonpayment undermeasurement suggests at least a +1 ppt overestimate in 2020 CPI shelter ...
Working Papers , Paper 20-22R2

Working Paper
Explaining the Boom-Bust Cycle in the U.S. Housing Market: A Reverse-Engineering Approach
Gelain, Paolo; Lansing, Kevin J.; Natvik, Gisele J. (2015-01)
We use a simple quantitative asset pricing model to ?reverse-engineer? the sequences of stochastic shocks to housing demand and lending standards that are needed to exactly replicate the boom-bust patterns in U.S. household real estate value and mortgage debt over the period 1995 to 2012. Conditional on the observed paths for U.S. disposable income growth and the mortgage interest rate, we consider four different specifications of the model that vary according to the way that household expectations are formed (rational versus moving average forecast rules) and the maturity of the mortgage ...
Working Paper Series , Paper 2015-2

Working Paper
Determinants of Differential Rent Changes: Mean Reversion versus the Usual Suspects
Marsh, Fred; Shoemaker, Owen; Verbrugge, Randal J.; Poole, Robert; Dorfman, Alan; Johnson, William (2015-08-05)
We study 2001-2004 and 2004-2007 rent growth of 18,000 rental units, ending our study prior to the Great Recession. Which variables correlate with rent growth: Location? Age? Rent level? Occupancy duration? Structure type? The answers deepen understanding of the rental market, help statistical agencies make decisions about sample stratification and substitution, and expose coverage problems. We document significant rent stickiness. Initial relative rent level is the best predictor, though mainly due to mean reversion. "Location" comes in second, though often not statistically significantly: ...
Working Papers (Old Series) , Paper 1511

Discussion Paper
How COVID-19 Affected First-Time Homebuyers
Lee, Donghoon; Tracy, Joseph (2021-04-12)
Efforts in the spring of 2020 to contain the spread of COVID-19 resulted in a sharp contraction in U.S. economic growth and an unprecedented, rapid rise in unemployment. While the first wave of the pandemic slowed the spring housing market, home sales rebounded sharply over the rest of the year, with strong gains in house prices. Given the rising house prices and continuing high unemployment, concerns arose that COVID-19 may have negatively affected first-time homebuyers. Using a new and more accurate measure of first-time homebuyers, we find that these buyers have not been adversely affected ...
Liberty Street Economics , Paper 20210412

Journal Article
The Limited Supply of Homes
Rappaport, Jordan (2016-03-23)
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.
Macro Bulletin

Discussion Paper
Developing Inclusive Communities: Challenges and Opportunities for Mixed-Income Housing
Duckworth, Richard; Carpenter, Ann; Lewis Glover, Renée (2017-01-15)
Over the past decade, housing costs have risen faster than incomes. The need for affordable rental housing has well outpaced the number of available units as well as funding allocations at the federal level. Local regulation and land use policies that increase the cost of subsidized, mixed-income housing construction and preservation have contributed to the affordability problem.To meet the affordable housing needs in U.S. communities, innovation, creativity, and "out of the box" thinking may be required, particularly as it relates to reducing the rapidly increasing costs of development. ...
FRB Atlanta Community and Economic Development Discussion Paper , Paper 2017-01

Discussion Paper
The Housing Boom and the Decline in Mortgage Rates
Liu, Haoyang; Lucca, David O.; Parker, Dean; Rays-Wahba, Gabriela (2021-09-07)
During the pandemic, national home values and housing activity soared as mortgage rates declined to historic lows. Under the canonical “user cost” house price model, home values are held to be very sensitive to interest rates, especially at low interest rate levels. A calibration of this model can account for the house price boom with the observed decline in interest rates. But empirically, we find that home values are nowhere near as sensitive to interest rates as the user cost model predicts. This lower sensitivity is also found in prior economic research. Thus, the historical ...
Liberty Street Economics , Paper 20210907

Journal Article
A Tight Labor Market Could Keep Rent Inflation Elevated
Smith, Andrew Lee; Bundick, Brent (2023-03-01)
Rent inflation responds more to labor market conditions compared with other components of inflation. We attribute this link between labor market tightness and rent inflation to greater demand for rental units afforded by job gains and wage growth. Although online measures of asking rents currently suggest official measures of rent inflation will decline, we caution that rent inflation is likely to remain above pre-pandemic levels so long as the labor market remains tight.
Economic Bulletin , Issue March 1st, 2023 , Pages 4

Working Paper
Late Payment Fees and Nonpayment in Rental Markets, and Implications for Inflation Measurement: Theoretical Considerations and Evidence
Janson, Wesley; Verbrugge, Randal (2021-04-06)
tatistical agencies track rental expenditures for use in the national accounts and in consumer price indexes (CPIs). As such, statistical agencies should include late payment fees and nonpayment in rent. In the US context, late payment fees are excluded from the CPI. Ostensibly, nonpayment of rent is included in the US CPI; but its treatment is deficient, and we demonstrate that small variations in nonpayment could lead to large swings in shelter inflation, and might have played a role in the 2009 measured shelter inflation collapse. They didn’t: while the national nonpayment incidence is ...
Working Papers , Paper 20-22R

Working Paper
The Effects of Racial Segregation on Intergenerational Mobility: Evidence from Historical Railroad Placement
Chyn, Eric; Haggag, Kareem; Stuart, Bryan (2023-09-05)
This paper provides new evidence on the causal impacts of citywide racial segregation on intergenerational mobility. We use an instrumental variable approach that relies on plausibly exogenous variation in segregation due to the arrangement of railroad tracks in the 19th century. Our analysis finds that higher segregation reduces upward mobility for Black children from households across the income distribution and White children from low-income households. Moreover, segregation lowers academic achievement while increasing incarceration and teenage birth rates. An analysis of mechanisms shows ...
Working Papers , Paper 23-18

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