R2 - Household Analysis

• Can the characteristics of new mortgages predict borrowers’ financial stress? Insights from the 2014 oil price decline

  Staff Analytical Note 2021-22 Olga Bilyk, Ken Chow, Yang Xu

  We study the relationship between characteristics of new mortgages and borrowers’ financial stress in Canada’s energy-intensive regions following the 2014 collapse in oil prices. We find that borrowers with limited home equity were more likely to have difficulty repaying debt.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Credit and credit aggregates, Econometric and statistical methods, Financial stability, Housing JEL Code(s): C, C2, C25, D, D1, D14, G, G2, G21, G5, G51, R, R2, R21

• Consumer Cash Withdrawal Behaviour: Branch Networks and Online Financial Innovation

  Staff Working Paper 2021-28 Heng Chen, Matthew Strathearn, Marcel Voia

  The physical network of bank branches is important in how consumers manage their cash holdings. This paper estimates how consumer withdrawal behaviour responds to the distance they must travel to their branch.

  Content Type(s): Staff research, Staff working papers Topic(s): Bank notes, Digital currencies and fintech JEL Code(s): G, G2, G21, R, R2, R22

• Detecting exuberance in house prices across Canadian cities

  Staff Analytical Note 2021-9 Ugochi Emenogu, Cars Hommes, Mikael Khan

  We introduce a model to detect periods of extrapolative house price expectations across Canadian cities. The House Price Exuberance Indicator can be updated on a quarterly basis to support the Bank of Canada’s broader assessment of housing market imbalances.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Econometric and statistical methods, Financial stability, Housing JEL Code(s): C, C5, C53, R, R2, R21, R3, R31

• Update on housing market imbalances and household indebtedness

  Staff Analytical Note 2021-4 Mikael Khan, Olga Bilyk, Matthew Ackman

  Exceptional strength in the housing market during the pandemic is underpinning Canada’s economic recovery. However, two key vulnerabilities—housing market imbalances and elevated household indebtedness—have intensified.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Coronavirus disease (COVID-19), Credit and credit aggregates, Financial stability, Housing, Recent economic and financial developments, Sectoral balance sheet JEL Code(s): D, D1, D14, D8, D84, E, E5, G, G2, G21, G28, R, R2, R21

• Household indebtedness risks in the wake of COVID‑19

  Staff Analytical Note 2020-8 Olga Bilyk, Anson T. Y. Ho, Mikael Khan, Geneviève Vallée

  COVID-19 presents challenges for indebted households. We assess these by drawing parallels between pandemics and natural disasters. Taking into account the financial health of the household sector when the pandemic began, we run model simulations to illustrate how payment deferrals and the labour market recovery will affect mortgage defaults.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Climate change, Coronavirus disease (COVID-19), Credit and credit aggregates, Econometric and statistical methods, Financial stability, Fiscal policy, Housing, Recent economic and financial developments, Sectoral balance sheet JEL Code(s): C, C2, C21, D, D1, D12, D14, E, E2, E24, E27, E6, E62, G, G2, G21, G28, R, R2

• The Formation of House Price Expectations in Canada: Evidence from a Randomized Information Experiment

  Staff Analytical Note 2019-24 Marc-André Gosselin, Mikael Khan, Matthieu Verstraete

  We conduct a randomized information experiment leveraging the Canadian Survey of Consumer Expectations. We provide causal evidence that respondents revise both their short- and medium-term expectations of future house price growth in a way that is consistent with observed short-term momentum in house prices. However, empirically, house price growth tends to revert to its mean in the medium term.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Financial stability, Housing JEL Code(s): C, C9, D, D8, D84, R, R2, R21

• Disentangling the Factors Driving Housing Resales

  Staff Analytical Note 2019-12 Mikael Khan, Taylor Webley

  We use a recently developed model and loan-level microdata 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.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Econometric and statistical methods, Financial stability, Financial system regulation and policies, Housing, Recent economic and financial developments JEL Code(s): C, C2, C22, E, E2, R, R2, R21

• Non-Resident Taxes and the Role of House Price Expectations

  Staff Analytical Note 2019-8 Mikael Khan, Matthieu Verstraete

  In recent years, the governments of Ontario and British Columbia have imposed taxes on purchases by non-Canadian residents of residential properties in certain jurisdictions.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Financial stability, Housing JEL Code(s): D, D8, D84, R, R2, R21

• Fundamental Drivers of Existing Home Sales in Canada

  Staff Discussion Paper 2018-16 Taylor Webley

  Existing home sales’ share of Canada’s economic pie has been rising in recent years, and variation around this trend has resulted in outsized contributions to changes in real gross domestic product (GDP). In this context, we use a cointegration framework to estimate the level of resale activity across the Canadian provinces that is supported by fundamentals—namely, full-time employment, housing affordability and migration flows—to help look through the volatility.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Econometric and statistical methods, Economic models, Housing JEL Code(s): C, C2, C22, C23, E, E2, E27, R, R2, R21

• Housing Price Network Effects from Public Transit Investment: Evidence from Vancouver

  Staff Working Paper 2018-18 Alex Chernoff, Andrea Craig

  In this paper, we estimate the effect on housing prices of the expansion of the Vancouver SkyTrain rapid transit network during the period 2001–11. We extend the canonical residential sorting equilibrium framework to include commuting time in the household utility function.

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Economic models, Housing JEL Code(s): H, H4, H41, R, R2, R21, R4, R41