Das House-Kapital: A Long Term Housing & Macro Model

Abstract

There are, by now, several long term, time series data sets on important housing & macro variables, such as land prices, house prices, and the housing wealth-to-income ratio. However, an appropriate theory that can be employed to think about such data and associated research questions has been lacking. We present a new housing & macro model that is designed specifically to analyze the long term. As an illustrative application, we demonstrate that the calibrated model replicates, with remarkable accuracy, the historical evolution of housing wealth (relative to income) after World War II and suggests a further considerable increase in the future. The model also accounts for the close connection of house prices to land prices in the data. We also compare our framework to the canonical housing & macro model, typically employed to analyze business cycles, and highlight the main differences.

Financial effects in historic consumption and investment functions

“…Papers such as Poterba and Samwick (1995) were explicitly motivated by the post-1980 s stock market rallies, but interest in house prices has increased recently as housing has become a booming sector (cf. Grossman and Steger 2017). The then chairman of the Federal Reserve Alan Greenspan pointed out in 2001 that the marginal propensity to consume should be higher out of housing wealth than out of stock market wealth (Cf.…”

R&D-Driven Medical Progress, Health Care Costs, and the Future of Human Longevity

“…For the depreciation rate of physical capital we follow Grossmann and Steger (2017) who argue that δ K = 0.07. The growth rate of labor efficiency, and thus of wage rates, is set equal to the annual growth rate of income per capita in the US and the UK for period 1960-2011, g = 0.02 (Jones, 2016a).…”