Household Debt and House Prices-at-risk: A Tale of Two Countries

Household Debt and House Prices-at-risk: A Tale of Two Countries
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Volume/Issue: Volume 2020 Issue 042
Publication date: February 2020
ISBN: 9781513530260
$18.00
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Topics covered in this book

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Banks and Banking , Exports and Imports , WP , price , household debt , housing market risk , house price risk , credit condition , housing supply , house price fluctuation , house price growth , house prices in the U , S , , housing overvaluation , housing valuation , Housing prices , Housing , Capital flows , Capital inflows , Market risk , Global , Household Indebtedness , United States , Canada , Quantile Regressions

Summary

To identify and quantify downside risks to housing markets, we apply the house price-at-risk methodology to a sample of 37 cities across the United States and Canada using quarterly data from 1983 to 2018. This paper finds that downside risks to housing markets in the United States have seemingly fallen over the past decade, while having increased in Canada. Supply-side drivers, valuation, household debt, and financial conditions jointly play a key role in forecasting house price risks. In addition, capital flows are found to be significantly associated with future downside risks to major housing markets, but the net effect depends on the type of flows and varies across cities and forecast horizons. Using micro-level data, we identify households vulnerable to potential housing shocks and assess the riskiness of household debt.