{
  "title": "The Housing Supply Channel of Monetary Policy",
  "publication": "IMF Working Papers, February 2, 2024",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2024/02/02/the-housing-supply-channel-of-monetary-policy-544046",
  "canonical": "https://www.imf.org/en/publications/wp/issues/2024/02/02/the-housing-supply-channel-of-monetary-policy-544046",
  "overlayPath": "/en/publications/wp/issues/2024/02/02/the-housing-supply-channel-of-monetary-policy-544046/index.md",
  "summary": "We study the role of regional housing markets in the transmission of US monetary policy. Using a FAVAR model over 1999q1–2019q4, we find sizeable heterogeneity in the responses of US states to a contractionary monetary policy shock.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Study of the role of regional housing markets in the transmission of US monetary policy using a FAVAR model over 1999q1–2019q4.\n- Authors: Bruno Albuquerque, Martin Iseringhausen, Frederic Opitz.\n- Publication date: February 2, 2024.\n- Series: Working Paper No. 2024/023, Issue: 023, Volume: 2024, Pages: 60.\n- DOI: https://doi.org/10.5089/9798400264498.001.\n- ISBN: 9798400264498. ISSN: 1018-5941."
    },
    {
      "heading": "Key findings",
      "content": "- There is sizeable heterogeneity in the responses of US states to a contractionary monetary policy shock.\n- Part of the regional variation is due to differences in:\n  - housing supply elasticities,\n  - household debt overhang,\n  - housing wealth (volatility).\n- House prices and consumption respond more in supply-inelastic states.\n- House prices and consumption respond more in states with large household debt imbalances, where negative housing wealth effects bite more strongly and borrowing constraints become more binding.\n- Financial stability risks increase sharply in areas with large responses, as mortgage delinquencies and foreclosures surge, worsening banks’ balance sheets.\n- Monetary policy may have a stronger effect on housing tenure decisions in supply-inelastic states, where the homeownership rate and price-to-rent ratios decline by more."
    },
    {
      "heading": "Transmission mechanisms identified",
      "content": "- Housing supply elasticity modulates the pass-through from interest rates to house prices and consumption.\n- Housing wealth effects: larger negative housing wealth effects in areas with greater household debt imbalances amplify consumption responses.\n- Borrowing constraints: more binding post-shock in high-debt states, reinforcing demand-side declines."
    },
    {
      "heading": "Macrofinancial consequences",
      "content": "- Mortgage delinquencies and foreclosures surge in supply-inelastic and high-debt states following contractionary shocks.\n- Banks’ balance sheets worsen in these regions as financial stability risks increase sharply."
    },
    {
      "heading": "Housing tenure and market structure effects",
      "content": "- Stronger impacts on homeownership rates in supply-inelastic states.\n- Price-to-rent ratios decline more in supply-inelastic states following contractionary monetary shocks."
    },
    {
      "heading": "Policy implications",
      "content": "- Regional housing supply conditions are important for assessing the macrofinancial effects of rising interest rates.\n- Policymakers should account for heterogeneous state-level housing supply elasticities and household debt profiles when evaluating the transmission and financial-stability consequences of monetary policy.\n\nSource: Bruno Albuquerque, Martin Iseringhausen, and Frederic Opitz, \"The Housing Supply Channel of Monetary Policy\", IMF Working Papers 2024, 023 (2024), February 2, 2024, DOI: https://doi.org/10.5089/9798400264498.001.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2024/02/02/the-housing-supply-channel-of-monetary-policy-544046"
    }
  ],
  "bullets": [
    "[Markdown version](/en/publications/wp/issues/2024/02/02/the-housing-supply-channel-of-monetary-policy-544046/index.md)",
    "[Structured JSON version](/en/publications/wp/issues/2024/02/02/the-housing-supply-channel-of-monetary-policy-544046/index.json)",
    "[Bundle manifest](/en/publications/wp/issues/2024/02/02/the-housing-supply-channel-of-monetary-policy-544046/bundle-manifest.json)",
    "Authors: Bruno Albuquerque, Martin Iseringhausen, Frederic Opitz",
    "Published: February 2, 2024",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9798400264498.001",
    "Study of the role of regional housing markets in the transmission of US monetary policy using a FAVAR model over 1999q1–2019q4.",
    "Authors: Bruno Albuquerque, Martin Iseringhausen, Frederic Opitz.",
    "Publication date: February 2, 2024.",
    "Series: Working Paper No. 2024/023, Issue: 023, Volume: 2024, Pages: 60.",
    "DOI: https://doi.org/10.5089/9798400264498.001.",
    "ISBN: 9798400264498. ISSN: 1018-5941.",
    "There is sizeable heterogeneity in the responses of US states to a contractionary monetary policy shock.",
    "Part of the regional variation is due to differences in:",
    "House prices and consumption respond more in supply-inelastic states.",
    "House prices and consumption respond more in states with large household debt imbalances, where negative housing wealth effects bite more strongly and borrowing constraints become more binding.",
    "Financial stability risks increase sharply in areas with large responses, as mortgage delinquencies and foreclosures surge, worsening banks’ balance sheets.",
    "Monetary policy may have a stronger effect on housing tenure decisions in supply-inelastic states, where the homeownership rate and price-to-rent ratios decline by more.",
    "Housing supply elasticity modulates the pass-through from interest rates to house prices and consumption.",
    "Housing wealth effects: larger negative housing wealth effects in areas with greater household debt imbalances amplify consumption responses.",
    "Borrowing constraints: more binding post-shock in high-debt states, reinforcing demand-side declines.",
    "Mortgage delinquencies and foreclosures surge in supply-inelastic and high-debt states following contractionary shocks.",
    "Banks’ balance sheets worsen in these regions as financial stability risks increase sharply.",
    "Stronger impacts on homeownership rates in supply-inelastic states.",
    "Price-to-rent ratios decline more in supply-inelastic states following contractionary monetary shocks.",
    "Regional housing supply conditions are important for assessing the macrofinancial effects of rising interest rates.",
    "Policymakers should account for heterogeneous state-level housing supply elasticities and household debt profiles when evaluating the transmission and financial-stability consequences of monetary policy.",
    "**Working Paper**"
  ],
  "related": [
    {
      "title": "Working Paper",
      "role": "paper",
      "sourceUrl": "https://www.imf.org/-/media/files/publications/wp/2024/english/wpiea2024023-print-pdf.pdf",
      "summary": {
        "path": "/-/media/files/publications/wp/2024/english/wpiea2024023-print-pdf.pdf.md",
        "mime": "text/markdown"
      },
      "binary": {
        "path": "/-/media/files/publications/wp/2024/english/wpiea2024023-print-pdf.pdf",
        "mime": "application/pdf"
      }
    }
  ],
  "alternates": {
    "markdown": "/en/publications/wp/issues/2024/02/02/the-housing-supply-channel-of-monetary-policy-544046/index.md",
    "json": "/en/publications/wp/issues/2024/02/02/the-housing-supply-channel-of-monetary-policy-544046/index.json",
    "bundleManifest": "/en/publications/wp/issues/2024/02/02/the-housing-supply-channel-of-monetary-policy-544046/bundle-manifest.json"
  },
  "generatedAtUtc": "2026-09-16T23:35:42.798Z"
}