Work in Progress

We provide novel estimates of the timing, magnitudes, and potential determinants of the start of the last housing boom across American neighborhoods and metropolitan areas (MSAs) using a rich new micro data set containing 23 million housing transactions in 94 metropolitan areas between 1993 and 2009. We also match transactions data with loan information, enabling us to observe household income and other demographics for each neighborhood. Five major findings are reported. First, the start of the boom was not a single, national event. Booms, which are defined by the global breakpoint in an area’s price appreciation series, begin at different times over a decade-long period from 1995-2006. Second, the magnitude of the initial jump in house price appreciation at the start of the boom is economically, not just statistically, significant. On average, log house prices are over four points higher during the first year of the boom relative to the previous twelve month period for both MSAs and neighborhoods. There is no evidence that price growth was trending up prior to the start of the boom. Third, local income is the only potential demand shifter found that also had an economically and statistically significant change around the time that local housing booms began. Contemporaneous local income growth is large enough to account for half or more of the initial jump in house price appreciation. While these estimates indicate that the beginning of the boom was fundamentally justified on average, they do not imply that what followed was rational. Fourth, there is important heterogeneity in that result. Income growth is large and jumps at the same time as house price appreciation in areas that boomed early and have inelastic supplies of housing, but not in late booming areas and those with elastic supply sides. Fifth and finally, none of the demand-shifters analyzed show positive pre-trends, but some such as the share of subprime lending, do lag the beginning of the boom. This suggests that key players in the lending market more responded to the boom, rather than caused it to start.

What are the consequences of electing a female leader for policy and political outcomes? We answer this question in the context of U.S. cities, where women’s participation in mayoral elections increased from negligible numbers in 1970 to about one-third of the elections in the 2000’s. We use a novel data set of U.S. mayoral elections from 1950 to 2005, and apply a regression discontinuity design to deal with the endogeneity of female candidacy to city characteristics. In contrast to most research on the influence of female leadership, we find no effect of gender of the mayor on policy outcomes related to the size of local government, the composition of municipal spending and employment, or crime rates. While female mayors do not implement different policies, they do appear to have higher unobserved political skills, as they have a 6-7 percentage point higher incumbent effect than a comparable male. But we find no evidence of political spillovers: exogenously electing a female mayor does not change the long run political success of other female mayoral candidates in the same city or of female candidates in local congressional elections.

We provide the first multi-city, constant quality land price index for 35 major markets in China. While there is meaningful heterogeneity in land price growth across cities, on average the last nine years have seen land values skyrocket in many markets, not just those on or near the coast. The typical market has experienced double-digit compound average annual growth in real, constant-quality land values. The 2009-2010 stimulus period typically saw large surges in prices. Three notable characteristics about the land value appreciation series are their strong mean reversion at annual frequencies, the strong common factor in their movement, and their very high volatility. Quantities, not just prices, have been sharply increasing in recent years. The typical amount of space supplied via land auctions in our 35 city sample has doubled since 2008. Some local political economy traits such as the time the local Chinese Communist Party leader has been in office are correlated with land supply volume. We also investigate the quality of the two most prominent house price indexes in China, and conclude that a traditional hedonic index more accurately reflects how house prices have changed over time in eight major markets in China. Repeat sales indexes have become standard in many countries, but they are not as useful in emerging markets such as China because the bulk of the housing stock is relatively new and has not traded multiple times. A hedonic index shows much higher house price growth over time that do officially published series for the eight markets examined.

Previous research on the United States and Japan finds economically large impacts of changing real estate collateral value on firm investment. Working with unique data on land values in 35 major Chinese markets and a panel of firms outside the real estate industry, we estimate investment equations that yield no evidence of a collateral channel effect. One reason for this stark difference appears to be that some of the most dominant firms in China are state-owned enterprises (SOEs) which are unconstrained in the sense that they do not need to rely on rising underlying property collateral values to obtain all the financing necessary to carry out their desired investment programs. However, we also find no collateral channel effect for non-SOEs when we perform our analysis on disaggregated sets of firms. Norms and regulation in the Chinese capital markets and banking sector can account for why there is no collateral channel effect operating among these firms. We caution that our results do not mean that there will be no negative fallout from a potential real estate bust on the Chinese economy. There are good reasons to believe there would be, just not through a standard collateral channel effect on firm investment.

Utilizing new panel micro data on the ownership sequences of all types of borrowers from 1997-2012 leads to a reinterpretation of the U.S. foreclosure crisis as more of a prime, rather than a subprime, borrower issue. Moreover, traditional mortgage default factors associated with the economic cycle, such as negative equity, completely account for the foreclosure propensity of prime borrowers relative to all-cash owners, and for three-quarters of the analogous subprime gap. Housing traits, race, initial income, and speculators did not play a meaningful role, and initial leverage only accounts for a small variation in outcomes of prime and subprime borrowers.