HOUSE PRICES AROUND THE WORLD Hites Ahir IMF

HOUSE PRICES AROUND THE WORLD Hites Ahir IMF, Research Department February 27, 2019 Views expressed in this presentation and during the talk are those of the presented and should not be ascribed to the IMF

Outline 01 02 03 04 House prices over the longrun House prices during the recent boom & doom Current state of global house prices Housing affordability 2

I. HOUSE PRICES OVER THE LONGRUN

Any guess when was this written? “From London, to Los Angeles, house prices have long been a favorite topic of conversation. But now economist and policy-makers are paying attention to the value of homes as a possible leading economic indicator (…) As business goes global, ordinary humans too have found a new interest: Henry wants to know how the price of his [house] in suburbia has fared compared with Heinrich’s or Enrico’s. The snag is that few governments publish an official index of house prices. ” 4

A search of the word “house prices” in the Economist magazine. 5

The price of the White House 1800 2009 2018 When Irish architect James Hoban finished the White House in Washington DC in 1800, the value was said to be around US$230 thousand. when President Bush handed over the keys to Barack Obama in 2009, it was valued nearly US$300 million. Another fast-forward to 2018 and the value was back up at around US$425 million. Fast-forward 200 years, when George W. Bush took up residence in 2001, it was valued at nearly US$170 million. In 2011, with the downturn in the US housing market, the price fell to around US$250 million. 2001 2011 Source: Zillow 6

House prices over the long-run Countries included: Australia, Belgium, Canada, Denmark, Finland, France, Germany, Japan, Netherlands, Norway, Sweden, Switzerland, United Kingdom, and United States. Source: Knoll, Schularick, and Steger (2017). 7

II. HOUSE PRICES DURING THE RECENT BOOM & DOOM

House prices had an unprecedented increase in the early 2000 s. 9

A closer inspection shows that the boom and bust was widespread… 10

…and the last boom lasted longer than any prior episodes… 11

…as this is the only time when housing made the front cover of The Economist. March 2002 June 2005 March 2007 12

III. CURRENT STATE OF GLOBAL HOUSE PRICES

Global House Price Index 14

Three track recovery 15

House prices in Canada, Germany, and the US Source: OECD 16

IV. HOUSING AFFORDABILITY

Price-to-income ratio 18

Headlines on affordability 19

Headlines on foreign investors and housing 20

Headlines on short-term rentals and housing 21

Share of income spent on mortgage 22

A look at Share of income spent on mortgage in select cities 23

A look at annual income in select cities 24

Home values over time 25

A look at home values in select cities 26

Chicago 27

San Francisco 28

Washington DC area 29

Thank you. • This presentation draws on the work done by The Economist, OECD, Trulia, Zillow, and my joint work with Prakash Loungani. • Teacher, Can You Live Here? (Trulia. April 12, 2017). Source for slides 27 to 29. • A Wealth of Problems: How the Housing Bust Widened the Rich-Poor Gap (Zillow, July 12, 2016). Source for slides 22 to 26. 30