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Working Paper
Mortgage Borrowing and the Boom-Bust Cycle in Consumption and Residential Investment
This paper studies the transmission of the major shocks in the U.S. housing market in the 2000s to consumption and residential investment. Using geographically disaggregated data, I show that residential investment is more responsive to these shocks than consumption, as measured by elasticities and the implied contributions to GDP growth. I develop a structural life-cycle model featuring multiple types of housing investment to understand the large responses of residential investment. Consistent with the microdata, the model generates lumpy debt accumulation, lumpy housing investment and a ...
Working Paper
Capital Flows, Asset Prices, and the Real Economy: A "China Shock" in the U.S. Real Estate Market
We study the effects of foreign real estate capital flows on local asset prices and employment using detailed housing transactions data. We document (i) a "China shock" in the U.S. real estate market after 2007 driven by the Chinese government's house purchase restrictions and (ii) "home bias" in foreign Chinese housing purchases in the United States as they are concentrated in ZIP codes historically populated by ethnic Chinese. Exploiting the quasi-random temporal and spatial variation of real estate capital inflows from China, we find that foreign Chinese housing purchases have a positive ...
Working Paper
The Propagation of Regional Shocks in Housing Markets: Evidence from Oil Price Shocks in Canada
Shocks to the demand for housing that originate in one region may seem important only for that regional housing market. We provide evidence that such shocks can also affect housing markets in other regions. Our analysis focuses on the response of Canadian housing markets to oil price shocks. Oil price shocks constitute an important source of exogenous regional variation in income in Canada because oil production is highly geographically concentrated. We document that, at the national level, real oil price shocks account for 11% of the variability in real house price growth over time. At the ...
Journal Article
Comparing Two House-Price Booms
In this Economic Commentary, we compare characteristics of the 2000–2006 house-price boom that preceded the Great Recession to the house-price boom that began in 2020 during the COVID-19 pandemic. These two episodes of high house-price growth have important differences, including the behavior of rental rates, the dynamics of housing supply and demand, and the state of the mortgage market. The absence of changes in fundamentals during the 2000s is consistent with the literature emphasizing house-price beliefs during this prior episode. In contrast to during the 2000s boom, changes in ...