scholarly journals The Effects of the Flat Tax Reform Proposal an the U.S. Housing Market

1998 ◽  
Vol 13 (0) ◽  
pp. 51-75
Author(s):  
Keakook Song
Keyword(s):  
Housing Market ◽  
Tax Reform ◽  
Home Ownership ◽  
Housing Price ◽  
Regression Result ◽  
Flat Tax ◽  
Tax Neutrality ◽  
Reform Proposal ◽  
Long Run ◽  
Short Run

This paper analyzes the effects of the Armey-Shelby tax reform proposal among the flat tax proposals on new owner-occupied housing market in USA on the basis of partial equilibrium. The effects in the short- and long-run are examined based on the Kenneth T. Rosen's regression result focusing on the effects of the user costs on home ownership. The Armey-Shelby plan would cause housing price in the short run to decrease with unchanged quantity because of nondeductibility of mortgage interest and property tax payments in the short-run. But the plan would cause housing market in the long run to be more activated, that is, increase in housing quantity and decrease in housing price, through lower interest rate caused by untaxed savings and investments that mean tax neutrality against savings and investments.

Resilient homeownership: how partnership-based finance would have prevented the 2008 US mortgage crisis

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mejda Bahlous-Boldi
Keyword(s):  
Housing Market ◽  
Home Ownership ◽  
House Price ◽  
Capital Gains ◽  
Wealth Accumulation ◽  
Causality Test ◽  
Content Type ◽  
Long Run ◽  
Default Rates ◽  
Short Run

Purpose The purpose of this study is to demonstrate that the conventional mortgage system is not appropriate for household finance because it encourages equity extraction and excessive leverage during housing boom and leads to negative equity during a housing bust, a situation that translates into mortgage defaults and foreclosures. Home financing could alternatively be structured as a diminishing partnership preventing the homeowner from ever having negative equity. Design/methodology/approach Using Johansen’s cointegration test, the authors provide evidence of a long-run relationship between the delinquency rates, volume of refinancing and the change in house price index (HPI) during the 1994–2019 period. To unravel the short run dynamics between these variables, the authors used a Granger causality test that concludes that the volume of refinancing and the change in the HPI Granger cause default rates. Findings The authors provide evidence that under the current conventional mortgage system, excessive refinancing opportunities and equity extraction that are the main factors determining delinquency rates leading to a non-sustainable homeownership. Practical implications If mortgages were such that they do not incentivize defaults and foreclosures during a housing downturn, the recovery of the housing market always leads to capital gains. Therefore, disincentivizing refinancing and equity extraction would lead to a more sustainable homeownership. Social implications Households would be encouraged to pursue sustainable homeownership through a partnership-based model with long-term wealth accumulation for themselves and their heirs rather than short-term home ownership through the conventional mortgage system, leading to negative equity and defaults when the housing market slumps. Originality/value Policymakers ought to rethink the mortgage design by promoting partnership-based finance to protect the equity a household accumulates over a lifetime and thereby enhancing stable and sustainable homeownership.

scholarly journals Loan-to-Value Ratio and Housing Price Cycle: Empirical Evidence From Indonesia

2017 ◽  
Vol 18 (2) ◽  
pp. 225 ◽  
Author(s):  
Charvin Lim ◽  
Siwi Nugraheni
Keyword(s):  
Housing Market ◽  
Housing Price ◽  
Macroeconomic Factors ◽  
Subprime Mortgage ◽  
Financial Variables ◽  
Global Recession ◽  
Long Run ◽  
Short Run ◽  
Effective Policy ◽  
Short And Long Term

The subprime mortgage crisis in 2007-2009 which led to a global recession has highlighted the importance of regulating credit for housing market. The urgency arises not only to manage non-performing ratio, but further to manage price in the housing market which is a potent source of financial imbalance. Loan-to-value (LTV) regulation is imposed in order to dampen the housing price cycle, preventing the occurrence of bubble issue. This study tries to capture the influence of LTV implementation on housing price and assesses its effectiveness in the national scope. Error correction model is used to portray the short and long-term dynamics of housing cycle with regard to policy, macroeconomic, and financial variables. We concluded that LTV is an effective policy to dampen the price cycle in the long run, but not in the short run. In the short run, housing price is closely determined by the macroeconomic factors. Furthermore, we found that the implementation of LTV has made housing price to become more persistent, suggesting a change in the market expectation structure and the behavior of housing price cycle.

scholarly journals Untangling the nonlinear “knots” of UK’s housing prices

2019 ◽  
Vol 46 (5) ◽  
pp. 1083-1103
Author(s):  
Constantinos Alexiou ◽  
Sofoklis Vogiazas
Keyword(s):  
Housing Market ◽  
House Prices ◽  
Housing Prices ◽  
Positive Association ◽  
Research Area ◽  
Content Type ◽  
Nonlinear Ardl ◽  
Long Run ◽  
Short Run ◽  
The Uk

Purpose Housing prices in the UK offer an inspiring, yet a complex and under-explored research area. The purpose of this paper is to investigate the critical factors that affect UK’s housing prices. Design/methodology/approach The authors utilize the recently developed nonlinear ARDL approach of Shin et al. (2014) over the period 1969–2016. Findings The authors find that both the long-run and short-run impact of the price-to-rent (PTR) ratio and credit-to-GDP ratio on house prices (HP) is asymmetric whilst ambiguous results are established for mortgage rates, industrial production and equities. Apart from the novel framework of analysis, this study also establishes a positive association between HP and the PTR ratio which suggests a speculative behaviour and could imply the formation of a housing bubble. Originality/value It is the first study for the UK housing market that explores the underlying fundamental relationships by looking at nonlinearities hence, allowing HP to be tied by asymmetric relationships in the long as well as in the short run. Modelling the inherent nonlinearities enhances significantly the understanding of UK housing market which can prove useful for policymaking and forecasting purposes.

scholarly journals International Real Estate Review

2018 ◽  
Vol 21 (3) ◽  
pp. 397-418
Author(s):  
Chin-Oh Chang ◽  
◽  
Shu-Mei Chen ◽  
Keyword(s):  
Housing Market ◽  
Home Ownership ◽  
Housing Prices ◽  
Housing Price ◽  
Poor Quality ◽  
Housing Demand ◽  
Vacancy Rate ◽  
Income Ratio ◽  
Holding Cost ◽  
Housing Vacancy

This paper discusses the contradicting phenomenon of housing demand in Taiwan. First, an introduction is given on the three primary characteristics of the housing market in Taiwan, which are a high housing vacancy rate, high housing prices and high home ownership. Secondly, we explore the motivation and preferences behind housing purchase. Since the housing price-income ratio continues to increase, unaffordable housing prices cause households to suffer from poor quality of life. The issues of housing justice are highlighted. Recently, the demographics and social values have rapidly changed. Therefore, even if homebuyers face unaffordable housing prices, they still prefer to buy housing instead of renting due to the traditional cultural belief that ¡§to have land is to have wealth¡¨. This has resulted in the phenomenon with high home ownership rate yet high housing prices. On the other hand, the low holding cost of housing and imbalance in urban and rural development perpetuate the high housing vacancy rate in the housing market. This results in an unhealthy housing market and misallocation of resources. Finally, recommendations for related government policy making are made based on the findings.

scholarly journals Export Tax Reform and the Competitiveness of Imported Soybeans in China

2019 ◽  
Vol 51 (3) ◽  
pp. 511-525 ◽  
Author(s):  
Andrew Muhammad ◽  
Constanza Valdes
Keyword(s):  
United States ◽  
Tax Reform ◽  
The United States ◽  
Import Demand ◽  
Chinese Market ◽  
Long Run ◽  
Export Tax ◽  
Export Taxes ◽  
Short Run ◽  
Demand Changes

AbstractExport tax reform in Argentina could improve its competitiveness in China’s soybean market, displacing exports from competing countries like Brazil and the United States. We examined the factors that determine China’s demand for imported soybean products and how export taxes could affect exporting countries. Using import demand and vector autoregression estimates, we conducted simulations of China’s import demand assuming the elimination of export taxes in Argentina. Results indicated that Argentine soybean products could realize gains in the Chinese market, but only in the short run. Projected import demand changes in the long run were insignificant for all exporting countries.

Long-run drivers and integration in interprovincial Canadian housing price relations

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Vijay Kumar Vishwakarma
Keyword(s):  
Housing Market ◽  
Granger Causality ◽  
Global Financial Crisis ◽  
Housing Prices ◽  
Housing Price ◽  
Housing Markets ◽  
Content Type ◽  
Stochastic Trend ◽  
Long Run ◽  
Long Run Equilibrium

Purpose This paper aims to examine the integration of housing markets in Canada by examining housing price data (1999–2016) of six metropolitan areas in different provinces, namely, Calgary, Vancouver, Winnipeg, Toronto, Montreal and Halifax. The authors test for cointegration, driver cities of long-run relationships, long-run Granger causality and instantaneous causality in light of the global financial crisis (GFC) (2007–2008). Design/methodology/approach The authors use Johansen’s system cointegration approach with structural breaks. Moving average representation is used for common stochastic trend(s) analysis. Finally, the authors apply vector error correction model-based Granger causality and instantaneous causality. Findings Cities’ housing prices are in long-run equilibrium. Post-crisis Canadian housing markets became more integrated. The Calgary, Vancouver, Toronto and Montreal markets drive the Canadian housing market, leading all cities toward long-run equilibrium. Strong long-run Granger causality exists, but the authors observe no instantaneous causality. Price information takes time to disseminate, and long-run price adjustments play a significant role in causation. Practical implications The findings of cointegration increasing after the GFC and strong lead–lag can be used by investors to arbitrage and optimize portfolios. This can also help national and local policymakers in mitigating risk. Incorporating these findings can lead to better price forecasting. Originality/value This study presents many novelties for the Canadian housing market: it is the first to use repeat-sales regional pricing indices to test long-run behaviors, conduct common stochastic trend analyzes and present causality relations.

scholarly journals International Real Estate Review

2017 ◽  
Vol 20 (3) ◽  
pp. 375-396
Author(s):  
Gary Wai Chung Wong ◽  
◽  
Lok Sang Ho ◽  
Keyword(s):  
Interest Rate ◽  
Housing Market ◽  
Supply And Demand ◽  
Housing Prices ◽  
Housing Price ◽  
Price Expectations ◽  
Price Expectation ◽  
Long Run ◽  
Property Price ◽  
Explicit Consideration

This paper builds on the literature that shows policy often plays a key role in housing cycles. Using the cointegration approach which focuses on the supply and demand dynamics of the housing market, and with explicit consideration of housing price expectations proxied by the price-earning ratio in financial markets, this paper identifies two cointegrating relations: a long run demand-side relation that involves housing property price, interest rate, price expectation and income; and a supply-side relation that involves private housing completion, property price, interest rate, and building and land costs. Based on Hong Kong data from 1990 a£á¡§ 2012, which covers big cycles in the housing market, this paper suggests that policies to augment or restrain housing supply in the attempt to stabilize housing prices have been counterproductive.

scholarly journals International Real Estate Review

2018 ◽  
Vol 21 (2) ◽  
pp. 251-274
Author(s):  
Yuming Li ◽  
◽  
Jing Yang ◽  
Keyword(s):  
Real Estate ◽  
Housing Market ◽  
House Price ◽  
Excess Risk ◽  
Single Family ◽  
Price Changes ◽  
The Real Estate ◽  
Long Run ◽  
Short Run ◽  
The U.S

We examine the relation between risk and returns in the U.S. residential housing market. We find that the risk of house price changes and the magnitude relative to the risk of income changes vary with economic conditions. We measure the excess risk of house price changes by adjusting for the risk of income changes and economic variables associated with the real estate and financial sectors of the economy, and find a significant and positive relation between house price changes and excess risk. We also find that excess risk has significantly adverse effects on the short-run momentum and long-run reversal of house price changes across metro areas, thus implying that excess risk induces price rigidity and helps to explain for the serial correlations in price changes in the U.S. single-family housing market.

International Co-movement of Housing Price Cycles in East Asia and Greater China

2016 ◽  
Vol 15 (1) ◽  
pp. 78-98 ◽  
Author(s):  
Kyung-Hwan Kim ◽  
Young-Joon Park
Keyword(s):  
Hong Kong ◽  
East Asia ◽  
Housing Price ◽  
Greater China ◽  
Credit Supply ◽  
Long Run ◽  
The World ◽  
Short Run ◽  
Specific Factors ◽  
Country Specific

This paper examines the characteristics of housing price cycles in East Asia and Greater China for the period from 2001:Q1 to 2010:Q1. We find that housing price cycles in East Asia (China, Hong Kong, Japan, Korea, Singapore, and Taiwan) are accounted for mainly by region-specific and country-specific factors. East Asia's regional housing price cycles co-move strongly with the world housing price cycle in the long run, but relatively weak co-movement is found in the short run. Housing cycles in Greater China (China, Hong Kong, and Taiwan) and Singapore co-move with Northeast Asia's regional housing price cycle in the long run, but this tendency fails to show up in the short run. Both domestic monetary and business-cycle effects are important in accounting for housing price cycles in China, Hong Kong, Japan, and Taiwan, while credit supply is crucial for Korea. Fiscal policy does not play a significant role. We find empirical evidence of a China effect in housing price cycles in Hong Kong, Taiwan, and Singapore.

scholarly journals The Private Housing Market Cyclical Price Dynamics

2020 ◽  
Vol 6 (2) ◽  
pp. p173
Author(s):  
SUN, Jingbo ◽  
HO, Kim Hin / David
Keyword(s):  
Housing Market ◽  
Housing Price ◽  
Market Mechanism ◽  
Price Dynamics ◽  
Herd Behavior ◽  
Momentum Strategy ◽  
For Profit ◽  
Long Run ◽  
Private Housing ◽  
Housing Price Dynamics

Two types of heterogeneous investors (momentum and disposition) form a unique difference model to interpret housing price dynamics. Three parameters are crucial: auto-correlation, the rate of mean reversion and the contemporaneous adjustment towards long-term equilibrium price. For Singapore, we examine the dynamic structures that oscillate and/or diverge from equilibrium. Disposition investors predominate although the interaction between momentum and disposition investors acts as a key determinant of private housing price dynamics for a given time in a specific market. Key implication is that Singapore’s private housing market is low risk, offering stable returns owing to virtually no divergence even in the speculative 1990s. The best way to invest is to consider the momentum strategy and avoid the herd behavior for profit sustainability. For policy-makers, the Singapore private housing market is over-damped in the long run. Predominating disposition investors contribute to the market mechanism, which automatically adjusts private housing market prices. It is imperative to relax government intervention in Singapore’s private housing market to enhance its efficiency.

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