House Prices and Affordability - A First and Second Look Across Countries
AbstractIn this paper we analyze the development of house prices for eight different countries over the period 1970-2003. First we look at real house price dynamics of the United States, the United Kingdom, Germany, France, Italy, the Netherlands, Sweden, and Belgium. After discussing the observable similarities and variations in national house prices, we continue by analyzing structural differences in legislation and mortgage markets, which might help us to understand the cross-sectional variation in prices levels and price developments. Next, we construct a comprehensive first-buyer affordability model in which nominal house prices are corrected for household income changes and the net financing costs of mortgage payments. This model grants us a second look on the cross-section of international house price dynamics. We finish our study with first-buyer elasticity tests, which give a first glance on the stability of each price level on the basis of affordability.
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Bibliographic InfoPaper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 083.
Date of creation: Jan 2006
Date of revision:
house prices; affordability index; price-elasticity; stress test.;
Find related papers by JEL classification:
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-02-19 (All new papers)
- NEP-EEC-2006-02-19 (European Economics)
- NEP-FIN-2006-02-19 (Finance)
- NEP-MAC-2006-02-19 (Macroeconomics)
- NEP-URE-2006-02-19 (Urban & Real Estate Economics)
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- Veronica Cacdac Warnock & Francis E. Warnock, 2007. "Markets and Housing Finance," NBER Working Papers 13081, National Bureau of Economic Research, Inc.
- Veronica Cacdac Warnock & Francis E. Warnock, 2008. "Markets and Housing Finance," Working Papers 032008, Hong Kong Institute for Monetary Research.
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