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

February 28, 2020

Preview Citation

Format: Chicago

Adrian Alter, and Elizabeth M. Mahoney Household Debt and House Prices-at-risk: A Tale of Two Countries, (USA: International Monetary Fund, 2020) accessed September 19, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

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.

Subject: Balance of payments, Capital flows, Capital inflows, Financial regulation and supervision, Housing, Housing prices, Market risk, National accounts, Prices

Keywords: Canada, Capital flows, Capital inflows, Credit condition, Global, House price fluctuation, House price growth, House price risk, House prices in the U.S., Household debt, Household Indebtedness, Housing, Housing market risk, Housing overvaluation, Housing prices, Housing supply, Housing valuation, Market risk, Price, Quantile Regressions, United States, WP

Publication Details

Pages:

43
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2020/042
Stock No:

WPIEA2020042
ISBN:

9781513530260
ISSN:

1018-5941

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