Professional Documents
Culture Documents
*This presentation describes work done jointly with Ed Pinto at AEI and Morris Davis at the University of Wisconsin.
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Housing busts can be very damaging to the economy and financial system. Best to prevent them if possible. House prices can stray from fundamentals (construction cost, rent, income). Eventually correct back. Risk varies over the cycle. Increases during the boom. Land is the risky part of the housing bundle.
300
300
250
250
200
200
150
150
50
50
0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Open Questions
How do land and house prices move within a metro area? Is there a common spatial pattern across cities? How does risk correlate with the size of the gap between house prices and fundamentals? Are there threshold effects? What are the most effective ways for regulators to lean against house price booms? Can simple rules work? Micro data are important for addressing all of these questions.
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This Study
Uses property-level data to pop the hood on housing valuation within metro areas.
Focus on detached single-family homes.
Zip-level data
House price indexes: FNC and Zillow Construction cost indexes: MSB
Land value = house AVM value adj. reconstruction cost. Land is a shorthand for amenities of a given location.
Roll the property-level AVMs back from 2013:Q3 to 2000:Q1 using FNC zip-level house price indexes. Roll the property-level adjusted reconstruction cost back from 2013:Q3 to 2000:Q1 using MSB zip-level cost indexes.
For Montgomery County, almost all zips have same cost index
Back out implied land value for each property in each quarter.
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Part 3: Results
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Percent
More than 40
20777, 20833, 20860, 20861, 20862
20879
20879 20832 20855 20868, 20905 20853 20850 20851 20904 20902 20895, 20896 20814 20815 20812, 20816 20910 20912 20901 20903 20906
20877, 20880
20707, 20866
20852 20854
20817, 20818
20903
* Includes zip 20815, where index rose 7 percent. Source: Authors' calculations using data from FNC, Inc.
12
140
140
100
100
60 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
60
20879
20877, 20880
20707, 20866
20852 20854
20817, 20818
20903
Source: Authors' calculations using data from FNC, Inc. and Marshall & Swift/Boeckh.
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Square feet
25,000-40,000
20879
20879 20832 20855 20868, 20905 20853 20850 20851 20904 20902 20895, 20896 20814 20815 20812, 20816 20910 20912 20901 20903 20906
20877, 20880
20707, 20866
20852 20854
20817, 20818
20903
Source: Authors' calculations using data from FNC, Inc. and Marshall & Swift/Boeckh.
15
Dollars
20879
20879 20832 20855 20868, 20905 20853 20850 20851 20904 20902 20895, 20896 20814 20815 20812, 20816 20910 20912 20901 20903 20906
20877, 20880
20707, 20866
20852 20854
20817, 20818
20903
Source: Authors' calculations using data from FNC, Inc. and Marshall & Swift/Boeckh.
16
Percent
More than 65
20777, 20833, 20860, 20861, 20862
20879
20879 20832 20855 20868, 20905 20853 20850 20851 20904 20902 20895, 20896 20814 20815 20812, 20816 20910 20912 20901 20903 20906
20877, 20880
20707, 20866
20852 20854
20817, 20818
20903
Source: Authors' calculations using data from FNC, Inc. and Marshall & Swift/Boeckh.
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120
100
$40-$70/sf
80 80
$25-$40/sf
60 60
$15-$25/sf
40 40
0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Note: Observations for 2013 represent average of Q1, Q2, and Q3. Source: Authors calculations using data from FNC, Inc. and Marshall & Swift/Boeckh.
18
Percent change
300
200
100
0 Less than $15/sf $15-$25/sf $25-$40/sf Zips grouped by land price in 2013:Q3 $40-$70/sf More than $70/sf
Source: Authors calculations based on data from FNC, Inc. and Marshall & Swift/Boeckh.
19
Percent change
Source: Authors calculations based on data from FNC, Inc. and Marshall & Swift/Boeckh.
20
Percent Annual
70%
60%
$25-$40/sf
50%
$15-$25/sf
40%
30%
20% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Note: Observations for 2013 represent average of Q1, Q2, and Q3. Source: Authors' calculations using data from FNC, Inc. and Marshall & Swift/Boeckh.
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2000-12 Cycle: House Prices Fell More in Zips with Previous Large Rise in Land Share
10
-10
-20
-30
-40
-50
Maximum rise in land share from 2000 to any year through 2006, percentage points
Source: Authors' calculations using data from FNC, Inc. and Marshall & Swift/Boeckh.
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2000-12 Cycle: House Prices Fell More in Zips with Previous Large Rise in Price-Rent Ratio
10
60
70
80
90
100
110
120
130
140
-10
-20
-30
-40
-50
Maximum rise in price-rent ratio from 2000 to any year through 2006, index points
Source: Authors' calculations using data from FNC, Inc., Marshall & Swift/Boeckh, and REIS.
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2000-12 Cycle: House Prices Fell More in Zips with Previous Large Rise in Price-Income Ratio
10
-10
-20
-30
-40
-50
Maximum rise in price-income ratio from 2000 to any year through 2006, index points
Source: Authors' calculations using data from FNC, Inc., Marshall & Swift/Boeckh, and ScoreLogix.
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MSAs represent range of markets across the U.S. Counties selected to capture range of experience within the MSA. 26 counties in all. Total population of selected counties: about 40 million
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Summary
Housing submarkets are important in Montgomery County. House price swing was largest in outlying areas; it was much smaller in affluent, close-in areas. Land prices were more volatile than house prices, especially in the outlying areas. Rapidly rising land share was associated with sharp house price correction later on. Results suggest that clearest signal about over-valuation could come from developments in the outlying areas.
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