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on Housing and Real Estate |
| By: | Dionissi Aliprantis; Jeffrey Lin |
| Abstract: | This paper explores how spatial spillovers define neighborhoods and drive neighborhood change through a stylized computable equilibrium model of income-based residential sorting. We find three main results. First, stronger spillovers create larger, more distinct neighborhood clusters even when the spatial scope of externalities is small. Second, spillovers make neighborhoods resistant to small change but also susceptible to rapid shifts between equilibrium states. Third, stronger spillovers concentrate change at cluster boundaries and isolated locations rather than neighborhood interiors. Extending Schelling-like insights to income sorting dynamics, the model treats neighborhood shape as an endogenous outcome determined by decentralized household location choices mediated through housing markets. The framework helps explain persistent urban segregation patterns, neighborhood resilience, and the geography of neighborhood change, offering new approaches for linking spatial spillovers to urban spatial structure and dynamics. |
| Keywords: | Neighborhood dynamics; neighborhood formation; spatial externalities; income sorting; residential segregation; neighborhood morphology |
| JEL: | R23 C61 D62 |
| Date: | 2026–02–23 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedpwp:102819 |
| By: | Frédéric Robert-Nicoud; Pierre-Philippe Combes; Gilles Duranton; Laurent Gobillon |
| Abstract: | Canonical urban models fail to jointly account for flexible housing demand, nondegenerate city sizes, and observed urban systems. We introduce a unifying urban framework based on price-independent generalized linear (PIGL) preferences in which housing is a necessity. Non-homothetic housing demand generates income effects that cause urban costs to scale more strongly with population than wages, restoring a unique interior efficient city size under standard assumptions. The framework nests existing canonical models, remains tractable, and is consistent with key empirical regularities, including Zipf’s law and observed housing price elasticities. We also encapsulate a monocentric city model into our framework. |
| JEL: | R13 R21 R31 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34876 |
| By: | Luis Perez Garcia |
| Abstract: | Growing concerns about housing affordability have prompted the adoption of rent control policies and renewed debates over their effectiveness. This paper provides the first empirical evaluation of the 2024 rent control policy implemented in Catalonia under Spain's new national housing law. To identify the causal effect of the policy on the rental market, I use municipality-level administrative data and implement several difference-in-differences strategies and event study designs. The results point to a reduction in tenancy agreements and a less robust decrease in rental price growth. While the findings highlight important short-term consequences of rent control, they also underscore the need for caution due to data limitations and limited robustness in some estimates. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.08631 |
| By: | Kubitza, Christian; Damast, Dominik; Sørensen, Jakob Ahm |
| Abstract: | We document a novel transmission channel of monetary policy through the homeowners insurance market. On average, contractionary monetary policy shocks result in higher homeowners insurance prices. Using granular data on insurers’ balance sheets, we show that this effect is driven by the interaction of financial frictions and the interest rate sensitivity of investment portfolios. Specifically, rate hikes reduce the market value of insurers’ assets, tightening insurers’ balance sheet constraints and increasing their shadow cost of capital. These frictions in insurance supply amplify the effects of monetary policy on real estate and mortgage markets by making housing less affordable. We find that monetary policy shocks have a stronger impact on home prices and mortgage applications when local insurers are more sensitive to interest rates. This channel is particularly pronounced in areas where households face high climate risk exposure. Our findings highlight the role of insurance markets in amplifying macroeconomic shocks and the interconnections between homeowners insurance, residential real estate, and mortgage lending. JEL Classification: E5, E44, G21, G22, G5, R3 |
| Keywords: | financial frictions, housing markets, insurance, monetary policy |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263194 |
| By: | Julia Manso |
| Abstract: | Sentiment towards the Chinese real estate sector has deteriorated following the introduction of financing constraints in 2020 with the ''three red lines." Forcing developers to restructure their debt, the policy triggered a cascade of financing troubles, defaults, and reduced housing demand, ultimately culminating in a prolonged real estate crisis. This paper utilizes a network approach in line with Demirer et al. (2018) and Diebold and Yilmaz (2014) to measure daily time-varying connectedness in the stock return volatilities of major Chinese real estate developers throughout the crisis. Focusing on spillover between companies as reflected by market perception, this paper examines how connectedness evolves over time across firms with different regional exposures and state-ownership statuses, filling a gap in the literature to elucidate where property demand and real estate firm trustworthiness have deteriorated most. An event-study analysis of four key moments of the crisis outlines distinct phases of market sentiment: with the introduction of the three red lines, connectedness primarily reflects shared exposure and a uniform shock to the market. Then, the early unrest surrounding Evergrande exposes strong regional differentiation, with firms concentrated in less developed regions receiving significant spillover. By one year into the crisis, previously stable regions receive higher levels of spillover, and there is evidence of a substitution effect towards private developers. Two years into the crisis, the market has much less homogeneity in effects across regions and state-ownership status: major shocks induce minimal network changes, reflecting how investors have already priced in their beliefs. This paper also offers one of the most extensive timelines of the Chinese real estate crisis to date, and a new R package, GephiForR, was created for the network visualization in this paper. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.19740 |
| By: | Tibor Szendrei; Nikolett V\'ag\'o; Katalin Varga |
| Abstract: | This paper develops a House Price-at-Risk framework to examine how housing subsidies, credit conditions, and supply factors influence the distribution of house price growth in Hungary. Using quantile regression with adaptive LASSO variable selection, we identify variables driving downside versus upside risks across multiple horizons. Financial stress dominates the lower tail at short horizons, while unemployment and affordability constraints become the primary drivers of downside risk at longer horizons. Housing subsidies exhibit pro-cyclical characteristics, concentrating significant positive effects on the upper quantiles while leaving the lower tail largely unaffected. Supply-side variables display horizon-dependent sign reversals, with construction permits exerting upward pressure on prices in the short run but moderating them as supply materialises. Uncertainty decomposition reveals persistent left-tail dominance across all horizons. These findings suggest that macroprudential frameworks should account for the distributional effects of housing subsidies, particularly their pro-cyclical influence on house price growth. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.18592 |
| By: | Stephen B. Billings; Mark Hoekstra; Gabriel Pons Rotger |
| Abstract: | While a growing literature has documented the effect of neighborhoods on children, there is little evidence on how neighborhoods impact adults. This study examines the impact of neighborhoods on high-needs families in Denmark who are quasi-randomly assigned to social housing in different neighborhoods. Results indicate a one standard deviation improvement in nearby neighborhood quality causes a 0.08 standard deviation improvement in labor market outcomes, and a 2.8 percent reduction in the likelihood of criminal conviction. Additional results indicate the labor market effects are most consistent with additional job referrals from nearby neighbors, rather than differences in local job availability. |
| JEL: | I38 K42 R23 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34872 |
| By: | Lara Coulier; Selien De Schryder; Milan van den Heuvel; Tobias Verlaeckt (-) |
| Abstract: | We study how mortgage borrowers adjust their mortgage terms and household balance sheets in response to a loan-to-value (LTV) limit. Focusing on the 2020 Belgian LTV policy, we use granular loan- and account-level data from the country’s largest bank. A substantial share of borrowers reduced their LTV ratios, with adjustment patterns varying by income, liquid wealth, and household type. Borrowers mainly responded by increasing downpayments and reducing loan amounts, though these responses were weaker among lower-income households. While the adjustments led to safer mortgages, they were also associated with declines in liquid wealth and consumption in the year following purchase. |
| Keywords: | Housing, Macroprudential Policy, Mortgage Market, Household Finance, Borrower, Heterogeneity |
| JEL: | E58 G21 G51 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:rug:rugwps:26/1138 |
| By: | Michelle W. Bowman |
| Date: | 2026–02–26 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgsq:102828 |
| By: | Behn, Markus; Lo Duca, Marco; Perales, Cristian |
| Abstract: | Using information from the ECB’s Bank Lending Survey, we examine how the implementation of borrower-based macroprudential measures (BBMs) between 2009-Q1 and 2023-Q3 affected mortgage lending standards in a sample of 15 euro area countries. We find that banks generally tightened credit standards around the implementation of BBMs, with the strongest effect occurring contemporaneously. Such tightening of credit standards is observed for different types of BBMs, including limits on loan-to-value or debt-service-to-income ratios and maturities. We also find mild evidence that legally binding measures imply a stronger tightening of credit standards than measures in the form of non-binding recommendations. Finally, this tightening is more pronounced in cases where mortgage loan growth or real estate price growth is high, consistent with BBMs effectively smoothing the credit cycle. JEL Classification: G21, G28, G51 |
| Keywords: | borrower-based measures, credit standards, macroprudential policy, mortgages |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263190 |
| By: | Baris Arat; Hasan Fehmi Ates; Emre Sefer |
| Abstract: | Reliable real estate price indicators are typically published at city level and low frequency, limiting their use for neighborhood-scale monitoring and long-horizon planning. We study whether sub-city price indices can be forecasted at weekly frequency by combining physical development signals from satellite radar with market narratives from news text. Using over 350, 000 transactions from Dubai Land Department (2015-2025), we construct weekly price indices for 19 sub-city regions and evaluate forecasts from 2 to 34 weeks ahead. Our framework fuses regional transaction history with Sentinel-1 SAR backscatter, news sentiment combining lexical tone and semantic embeddings, and macroeconomic context. Results are strongly horizon dependent: at horizons up to 10 weeks, price history alone matches multimodal configurations, but beyond 14 weeks sentiment and SAR become critical. At long horizons (26-34 weeks), the full multimodal model reduces mean absolute error from 4.48 to 2.93 (35% reduction), with gains statistically significant across regions. Nonparametric learners consistently outperform deep architectures in this data regime. These findings establish benchmarks for weekly sub-city index forecasting and demonstrate that remote sensing and news sentiment materially improve predictability at strategically relevant horizons. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.18572 |
| By: | Matthew Maury; Michael Suher; Jeffery Y. Zhang |
| Abstract: | Does fair lending litigation impact mortgage lender decisions? Using a novel dataset of all fair lending legal actions from 1991 to 2023, we find that it does. In the wake of legal settlements for discrimination against Black borrowers, lenders significantly reduced denial rates for Black applicants. The reductions offset pre-litigation racial disparities in denial rates by litigated banks, relative to those banks' competitors. Origination rates for Black applicants also increased post-litigation. We further observe evidence of a spillover effect on the approval decisions of non-litigated banks operating in the same city as a litigated bank. Altogether, the evidence suggests that the enforcement of fair lending laws is an effective tool to reduce racial discrimination in credit markets. |
| Keywords: | Fair lending; Mortgages; Discrimination; Consumer lending |
| Date: | 2026–02–27 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfe:102842 |