R2 - Household AnalysisReturn

The study examines housing affordability in Germany from 2017 to 2023 in light of rising real estate prices and challenges in the housing market. It uses the Housing Affordability Index to identify trends and patterns and propose policy measures to tackle the problems. The results show regional differences, with large cities in particular facing rising prices. Overall, the housing affordability burden has worsened across the country, with the western federal states being particularly affected. Future research should focus on evaluating policy measures and analyzing future trends in order to develop appropriate strategies and make predictions for the future.

The paper deals with some relevant effects of appreciation of housing prices on social and aggregate welfare. As it has been found difficult to assess the current situation given the housing market being the most affected by the crisis, earlier data from 1995 to 2006 have been used. It generalizes previously available results by considering credit constraints together with endogeneity of housing prices. First, housing price appreciation implies improvement in aggregate welfare in a model with exogenous housing price and credit constraints. Then, housing price is endogenized by modelling the supply side of the housing market. In this model, housing price appreciation is caused by supply and demand shocks. The supply shock originates from a change in building permit cost. The demand shifts are generated by changes in household income and interest rates. Both credit-constrained and unconstrained versions of this model are considered. Finally, the combination of observed demand and supply shocks is used to quantify aggregate welfare effects on the US housing market. The results demonstrate that demand shocks dominated during that period and the aggregate welfare improved as a result of housing price appreciation.