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Journal Article
Remote Work and Housing Demand
The COVID-19 pandemic reshaped the way households work. Nearly a third of employees still worked from home part time or full time as of August 2022. This has significantly increased housing demand and is a key factor explaining why U.S. house prices grew 24% between November 2019 and November 2021. Analysis shows that the shift to remote work may account for more than half of overall house price increases and similar increases in rents. This fundamental evolution in work-related housing demand may be important for future house prices.
Journal Article
Extreme Weather and Financial Market Uncertainty
Extreme weather can have negative, minimal, or even positive effects on business performance—creating significant uncertainty about outcomes for those businesses. Financial markets show heightened uncertainty among investors for companies that have been hit by hurricanes. This uncertainty persists for several months after a hurricane’s landfall, as reflected by continued discussion of hurricanes in analyst calls. Comparing expected volatility to actual volatility shows that markets have underreacted to the uncertainty caused by hurricanes. After Hurricane Sandy, a particularly salient ...
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.
Journal Article
House Prices Respond Promptly to Monetary Policy Surprises
New evidence based on listings of homes for sale from 2000 to 2019 suggests house prices adjust to monetary policy changes over weeks rather than years, faster than previously thought. Housing list prices fall within two weeks after the Federal Reserve announces an unexpected policy tightening, similar to responses of other financial assets. House prices respond more strongly to unexpected changes in long-term interest rates than to surprises in the short-term federal funds rate. Changes in mortgage rates following Fed announcements are key to explaining this rapid house price reaction.
Journal Article
Can the News Drive Inflation Expectations?
How households expect inflation to evolve plays an important role in explaining overall inflation dynamics. Household expectations rose dramatically over the past year or so, much faster than professional forecasters’ inflation expectations. News coverage can explain part of this growing gap. Analyzing the volume and sentiment of daily news articles on inflation suggests that one-fourth of the increased gap between household and professional expectations can be attributed to heightened negative media coverage. These results highlight the important impact of the content and tone of economic ...