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Disentangling the Factors Driving Housing Resales

Author

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  • Mikael Khan
  • Taylor Webley

Abstract

We use a recently developed model and loan-level micro data to decompose movements in housing resales since 2015. We find that fundamental factors, namely housing affordability and full-time employment, have had offsetting effects on resales over our study period. Recent mortgage rule changes have likely contributed to slower resale activity in Canada, but their impact is estimated to be relatively small. Thus, much of the variation in resales since 2015 reflects deviations from long-run fundamentals, most notably in British Columbia and Ontario. We show that the deviations from fundamentals in these provinces are strongly correlated with house price expectations, which rose rapidly in 2016 but then retreated following provincial housing policy changes.

Suggested Citation

  • Mikael Khan & Taylor Webley, 2019. "Disentangling the Factors Driving Housing Resales," Staff Analytical Notes 2019-12, Bank of Canada.
    • Handle: RePEc:bca:bocsan:19-12
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    References listed on IDEAS

    as
    1. Mikael Khan & Matthieu Verstraete, 2019. "Non-Resident Taxes and the Role of House Price Expectations," Staff Analytical Notes 2019-8, Bank of Canada.
    2. Mikael Khan & Matthieu Verstraete, 2018. "Personal Experiences and House Price Expectations: Evidence from the Canadian Survey of Consumer Expectations," Staff Analytical Notes 2018-8, Bank of Canada.
    3. Taylor Webley, 2018. "Fundamental Drivers of Existing Home Sales in Canada," Discussion Papers 18-16, Bank of Canada.
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    Cited by:

    1. Johan Brannlund & Helen Lao & Maureen MacIsaac & Jing Yang, 2023. "Predicting Changes in Canadian Housing Markets with Machine Learning," Discussion Papers 2023-21, Bank of Canada.

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    1. Mikael Khan & Matthieu Verstraete, 2019. "Non-Resident Taxes and the Role of House Price Expectations," Staff Analytical Notes 2019-8, Bank of Canada.

    More about this item

    Keywords

    Econometric and statistical methods; Financial stability; Financial system regulation and policies; Housing; Recent economic and financial developments;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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