The Federal Reserve Bank of New York works to promote sound and well-functioning financial systems and markets through its provision of industry and payment services, advancement of infrastructure reform in key markets and training and educational support to international institutions.
The New York Fed engages with individuals, households and businesses in the Second District and maintains an active dialogue in the region. The Bank gathers and shares regional economic intelligence to inform our community and policy makers, and promotes sound financial and economic decisions through community development and education programs.
James Conklin, W. Scott Frame, Kristopher Gerardi, and Haoyang Liu
Editor’s note: When this post was first published, the chart labels for “Non-Boom Counties” were incorrect; the labels have been corrected. (February 26, 12:00 pm)
The role of subprime mortgage lending in the U.S. housing boom of the 2000s is hotly debated in academic literature. One prevailing
narrative ascribes the unprecedented home price growth during the mid-2000s to an expansion in mortgage lending to subprime borrowers. This post, based on our recent working paper, “Villains or Scapegoats? The Role of Subprime Borrowers in Driving the U.S. Housing Boom,” presents evidence that is inconsistent with conventional wisdom. In particular, we show that the housing boom and the subprime boom occurred in different places.
Andrew F. Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klaauw
The New York Fed’s Center for Microeconomic Data today released the Quarterly Report on Household Debt and Credit for the first quarter of 2019. Total household debt grew by $124 billion over the quarter, boosted by increases in mortgage, auto, and student loan balances. Over the past twenty years, the prevalence of each type of credit has waxed and waned, shifts linked to the housing boom, the Great Recession, and the subsequent economic recovery. In this blog post, we draw on the New York Fed’s Consumer Credit Panel—a nationally representative sample of Equifax credit report data and the basis of our Quarterly Report—to explore those longer-term trends in credit market participation.
From the fourth quarter of 2017 through the third quarter of 2018, the average contract interest rate on new thirty-year fixed rate mortgages rose by roughly 70 basis points—from 3.9 percent to 4.6 percent. During this same period, there was a broad-based slowing in housing market activity with sales of new single-family homes declining by 7.6 percent while sales of existing single-family homes fell by 4.6 percent. Interestingly though, these declines in home sales were larger than in the two previous episodes when mortgage interest rates rose by a comparable amount. This post considers whether provisions in the Tax Cuts and Jobs Act of 2017 (TCJA) might have also contributed to the recent decline in housing market activity.
In this post we take up the important question of the sustainability of homeownership for first-time buyers. The evaluation of public policies aimed at promoting the transition of individuals from renting to owning should depend not only on the degree to which such policies increase the number of first-time buyers, but also importantly on whether these new buyers are able to sustain their homeownership. If a buyer is unprepared to manage the financial responsibilities of owning a home and consequently must return to renting, then the household may have made little to no progress in wealth accumulation. Despite the importance of sustainability, to date there have been no efforts at measuring the sustainability of first-time homeownership. We provide an example of a first-time homebuyer sustainability scorecard.
In our previous post, we presented a new measure of first-time homebuyers. In this post, we use this improved measure to describe the characteristics of first-time buyers and how those characteristics change over time. Having an accurate assessment of first-time buyers is important given that the aim of many housing policies is to support the transition from renting to owning. A proper assessment of these housing policies requires an understanding of the impact of these policies on the share of first-time buyers and the characteristics of these buyers. Our third post will directly examine the sustainability of homeownership by first-time buyers.
One of the major debates in open economy macroeconomics is the extent to which capital inflows are beneficial for growth. In principle, these flows allow countries to increase their consumption and investment spending beyond their income by enabling them to tap into foreign saving. Periods of such borrowing, however, are associated with large trade deficits, external debt accumulation, and, in some cases, overheating when these economies operate beyond their potential output level for an extended period of time. The relevant question in this context is whether the rate at which a country is taking on external debt has useful predictive information about financial crises.
The global financial crisis has put financial stability risks—and the potential role of macroprudential policies in addressing them—at the forefront of policy debates. The challenge for macroeconomists is to develop new models that are consistent with the data while being able to capture the highly nonlinear nature of crisis episodes. In this post, we evaluate the impact of a macroprudential policy that has the government tilt incentives for banks to encourage them to build up their equity positions. The government has a role since individual banks do not internalize the systemic benefit of having more bank equity. Our model allows for an evaluation of the tradeoff between the size of such incentives and the probability of a future financial crisis.
In recent months, there have been some high-profile assessments of how far the Federal Reserve has come in terms of communicating about monetary policy since its “secrets of the temple” days. While observers say the transition to greater transparency “still seems to be a work in progress,” they note the range of steps the Fed has taken over the years to shed light on its strategy, including issuing statements to announce and explain policy changes following Federal Open Market Committee (FOMC) meetings, post-meeting press conferences and minutes, FOMC-member speeches and testimony, and “forward guidance” in all its variants.
As Director of Research for the New York Fed for the past seven years, Jamie McAndrews has been responsible for the Bank’s financial and economic policy research, as well as the collection of data and statistics from financial institutions. On the eve of his retirement on June 30, Jamie shared his perspective on how the Research and Statistics Group has changed with Andrew Haughwout, a senior vice president in the Group.
Liberty Street Economics features insight and analysis from New York Fed economists working at the intersection of research and policy. Launched in 2011, the blog takes its name from the Bank’s headquarters at 33 Liberty Street in Manhattan’s Financial District.
The editors are Michael Fleming, Andrew Haughwout, Thomas Klitgaard, and Asani Sarkar, all economists in the Bank’s Research Group.
The views expressed are those of the authors, and do not necessarily reflect the position of the New York Fed or the Federal Reserve System.
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