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Geographic variation in house price growth

Pre-pandemic vs. post-pandemic data maps

The COVID-19 pandemic has been fueling a major boom in the U.S. housing market, and prices have risen at a rate not seen since the mid-2000s. The year-over-year percent increase in the S&P/Case-Shiller National Home Price Index hit 14.58% in April, its highest value in the history of the series. In this post, we’ll look at how this surge in house prices is playing out across individual U.S. states.

The first GeoFRED map shows post-pandemic house price growth in each state in January 2021, and the second map shows pre-pandemic growth in January 2020. This measure of growth in house prices is the percent increase in the median listing price per square foot compared with a year ago. Both maps are included to get a quick sense of which states saw recent house prices increases that were demonstrably higher than their “usual,” pre-pandemic levels.

The presence of darker colors throughout the 2021 map reflects much higher post-COVID house price growth overall—in fact, in nearly all states. The national median values were 4% in January 2020 and 17% in January 2021. However, some areas had particularly dramatic increases, notably on the coasts and in some of the mountain states. For example, California saw a 3.5% increase in its median listing price between January 2019 and January 2020, but an almost 50% increase between January 2020 and January 2021.

The difference for the Midwest, on the other hand, is not as stark. But there are some exceptions: Tennessee, Michigan, and Minnesota saw notable changes from their pre-pandemic values.

Why have house prices risen more in some places than others? Home prices historically rise more in the expensive cities on the east and west coasts, with their more constrained supply. Many people anticipate working in the office less often, so increased demand for housing in the suburbs interacts with these areas’ low supply (and ability to build additional housing), which drives up prices more in these already high-priced regions.

Interstate relocation plays a role as well. The potential for remote work has workers seeking housing in historically low-priced markets that previously did not have major job hubs as the coasts do, resulting in price increases elsewhere.

How these maps were created: From the GeoFRED homepage, select “Build a New Map.” From the “Tools” menu, open the “Choose Data” tab and change Region Type to “State,” Data to “Housing Inventory: Median Listing Price per Square Feet,” Units to “Percent Change from Year Ago,” and Date to “2021 January” (and then “2020 January”). The legend can be modified under the “Edit Legend” tab.

Suggested by Victoria Gregory and Joel Steinberg.

Has the pandemic boosted labor productivity?

Output fell, hours worked fell more, so labor productivity is up

In a previous post, the FRED Blog disentangled the general concept of growth in output from growth in hours worked and growth in labor productivity. The key takeaway: Labor productivity growth allows workers to produce more goods and services during each hour of work.

The FRED graph above shows the amount of U.S. real output (in green), the overall number of hours worked (in red), and labor productivity (in blue). These quarterly indexes produced by the U.S. Bureau of Labor Statistics to measure each concept have been re-indexed to the first quarter of 2020, the start of the COVID-19-induced recession. The dashed line represents the value (100) for each of these concepts at that point in time.

Again, labor productivity is output per hour worked. For most of 2020,  overall output declined but overall hours worked declined even more. Because the reduction in hours worked was larger than the reduction in overall economic activity, labor productivity increased.

Historically, this is unusual. In all but 3 of the previous 11 recessions (1948-49, 1969-70, and 2001), the number of worked hours decreased less than real output did. As a result, labor productivity decreased for those 8 recessions.

As of the first quarter of 2021, inflation-adjusted output is above pre-recession levels and the number of hours worked remains depressed. When recessions end, overall economic activity tends to grow faster than employment and so labor productivity tends to get a boost. Will that end up being the case this time around? Keep up with the FRED Blog and we’ll figure it out with FRED® data.

How the graph was created: Search FRED for “Nonfarm Business Sector: Real Output Per Hour of All Persons.” From the “Edit Graph” panel, search for and add two more series: “Nonfarm Business Sector: Hours of All Persons” and “Nonfarm Business Sector: Real Output.” Next, change the units to “Index (Scale value to 100 for chosen date)” and from the U.S. recession menu select “2020-02-01,” the start date of the COVID-19-induced recession. Click on “Copy to all” and change the start date of the graph to 2019-12-01. Last, use the “Add Line” tab to create a user-defined line. Create a line with start and end values of 100. To use the same graph style shown here, use the menus in the “Format” tab.

Suggested by Diego Mendez-Carbajo.

Measuring an economy’s openness

Comparing global trade for Canada, Mexico, and the U.S.

The more an economy trades with the rest of the world, the more open it is. Another way to put it: The more integrated an economy is in the world economy, the more open it is. So how do you measure openness? One way is to look at the ratio of imports plus exports to GDP.

By the way, the size of the economy matters. The U.S. is a large and well-diversified economy, so it doesn’t need to trade that much. The Bahamas are much smaller and much less diversified, and so it needs to trade more.

The FRED graph above shows what our measure of openness looks like for the three North American trading partners: Canada in blue, Mexico in green, and the U.S. in red. The vertical lines correspond to the Canada-U.S. free trade agreement in 1989 and NAFTA in 1994.

For a more nuanced (and complicated) graph, we could examine trade  among just these three countries and not their trade with the entire world. But looking at our particular measure here and considering our assertions above, it’s not surprising that the openness of the U.S. economy is lower than that of its neighbors. We also see that there’s a general trend of increasing openness, which we can associate with the general trend of globalization more than the impact of any particular trade agreements.

How this graph was created: Search FRED for “Canada exports” and take the nominal measure. From the “Edit Graph” panel, add the series for Canadian imports and GDP and apply formula (a+b)/c*100 (to get percentages). From the “Add Line” tab, repeat for the U.S. and Mexico. For the horizontal lines, use the “Add Line” tab again, but this time add 2 “user-defined” lines: the first with values 0.1 and 89.9 in 1989-01-01 and the second in 1994-01-01.

Suggested by Christian Zimmermann.

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