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Särskilt yttrande till utredningen om Reglering av hushållens skulder (SOU 2024:71)

Ekonomistas-inlägg 2024-11-04 (Swedish only)

I egenskap av sakkunnig till utredningen om Reglering av hushållens skulder (SOU 2024:71) har jag skrivit ett särskilt yttrande till utredningen. I yttrandet stöder jag kommitténs förslag i kapitel 9 om en tydligare rambestämmelse, regeringens medgivande, ett högre bolånetak om 90 procent samt ett enhetligt amorteringskrav om 1 procent för belåningsgrader över 50 procent.

Men jag avstyrker bestämt ett införande av ett skuldkvotstak.

Utöver kommitténs förslag tillstyrker jag ett bolånetak på 95 procent för förstagångsköpare, definierade som de som inte ägt en primär bostad i Sverige de senaste tio åren.

Läs mer på Ekonomistas.

Is Swedish Household Debt Too High? Solvency, Liquidity, and Debt-Financed Overconsumption

“Is Swedish Household Debt Too High? Solvency, Liquidity, and Debt-Financed Overconsumption,” first draft July 2022, this version November 2024. Paper (latest version). CEPR Discussion Paper.

Abstract

Swedish authorities and international organizations that monitor and comment on Swedish economic policy have argued that Swedish household debt is too high and a threat to financial and macroeconomic stability (FMS). But household debt may become a threat to FMS under essentially three conditions: (1) Household debt becomes too high relative to household assets. (2) Households’ debt service becomes too high relative to incomes and payment capacity. (3) Households use home-equity withdrawals—made possible by rising house prices—to finance an unsustainable overconsumption of macroeconomic significance.

The analysis covers both the total stock of mortgages and its borrowers and the new mortgages and borrowers, not—as is common—only the new mortgages and borrowers. The total stock is much larger, its borrowers are many more, and they matter much more for FMS.

Two structural features mitigate risks from the Swedish household debt. First, on a closer look, mortgages are in fact a safe cash cow for banks and contribute to financial stability. Second, the mortgage rates are not exogenous but indirectly controlled by the Riksbank and its policy rate. The Riksbank sets the policy rate to maintain macro\-economic stability and contribute to financial stability.

Regarding condition (1), aggregate household assets are much larger and have grown much faster than the debt. Net wealth was twice the debt in 1985, five times the debt in 2024. LTV ratios among the borrowers of the mortage stock are much smaller than those among the new borrowers. A full 78% of the borrowers of the stock have home equity exceeding 30%, which is more than any housing price fall during the last 50 years. Regarding condition (2), the debt service of the borrowers of the stock is not high relative to incomes, because modest LTV ratios mean that required amortization rates are modest. Regarding condition (3), there is no indication that there is any debt-financed overconsumption (undersaving) of macro\-economic significance. The HEW recorded by the Swedish FSA is not unusually high, the saving rate is at a historical high, and the share of durable consumption in total consumption expenditures is normal.

Thus, none of the three conditions is present. Swedish household debt is neither too high nor a threat to financial or macroeconomic stability.

Are Swedish House Prices Too High? Why the Price-to-Income Ratio Is a Misleading Indicator

“Are Swedish House Prices Too High? Why the Price-to-Income Ratio Is a Misleading Indicator,” first version March 2022, revised April 2024. Paper (latest version). CEPR Discussion Paper. NBER Working Paper. VoxEU column.

Abstract

Appropriate indicators of housing valuation are important for macroprudential policy and assessments of risks to financial stability. Overvalued housing may result in a correction and a fall in house prices. This would weaken households’ balance sheets, reduce the collateral of mortgages and covered housing bonds, and threaten financial stability.

According to ECB (2023) and European Systemic Risk Board (2022), Swedish owner-occupied housing (OOH) was overvalued by about 55% in 2021q2, the largest overvaluation in the EU and EEA; according to European Commission (2023c), by about 30% in 2022. These assessments affect warnings and recommendations issued for Swedish economic policy and the shocks in EBA stress tests of Swedish banks.

But these large overvaluation assessments are due to the use of misleading indicators: the deviations of price-to-income (PTI) and price-to-rent ratios from their historical averages. It is shown that according to the appropriate indicator, the user- cost-to-income (UCTI) ratio, Swedish owner-occupied houses have since 2010 instead become increasingly undervalued (not overvalued), by about 30% in 2019q4. Due to rising mortgage rates, they are less undervalued in 2023q2, but still about 20%.

But these large overvaluation assessments are due to the use of misleading indicators: the deviations of price-to-income (PTI) and price-to-rent ratios from their historical averages. They disregard mortgage rates and other housing costs and lack scientific support. According to a large housing literature, it is not the purchase price but the user cost that is the appropriate measure of the cost of living in OOH, the cost of the housing services that the OOH delivers.

From this point of view, “Are house prices too high?” is the wrong question. The right question is, “Are user costs too high?”

New improved estimates of the user costs are constructed, including an adjustment for a preference shift during the coronavirus crisis in favor of larger and better housing. According to the user-cost-to-income (UCTI) ratio, Swedish owner-occupied houses have since 2010 instead become increasingly undervalued (not overvalued), by about 35% in 2019q4. Due to higher mortgage rates, they are less undervalued in 2023q4, but still about 25%.

For Sweden and the sample examined, the UCTI and PTI indicators are in fact strongly negatively correlated and have opposite signs (see figure 1.2). If the UCTI indicator is the right one, the PTI indicator is consistently wrong. Taking the average of the two indicators is not a good idea.

Figure 1.2: The preference-adjusted user-cost-to-income ratio and the negative of the preference-adjusted price-to-income ratio (percentage deviation from historical averages)

The valuation assessments of the ECB, the ESRB, the Commission, the OECD, and the IMF are scrutinized and compared. The problem of misleading indicators and overvaluation assessments—and resulting distorted warnings and recommendations—is not restricted to Sweden but concerns several other countries in the European Union.

Monetary Mystique and the Fed’s Path Toward Increased Transparency

“Monetary Mystique and the Fed’s Path Toward Increased Transparency,” chapter, in  King, Robert G., and Alexander L. Wolman (eds.), Essays in Honor of Marvin Goodfriend: Economist and Central Banker, Federal Reserve Bank of Richmond, 2022, 289-300.

Abstract

Marvin Goodfriend’s paper “Monetary Mystique: Secrecy and Central Banking” is a masterpiece: It is an extremely well-written, meticulous, and fair analysis and critique of the Federal Reserve’s defense of its practice of secrecy in monetary policy and central banking. His critique was devastating, and he completely demolished the Federal Open Market Committee’s (FOMC) arguments in the most precise and convincing way. Nevertheless, it took the Fed many years to reach the current standards of transparency and accountability in monetary policy.

Household Debt Overhang Did Hardly Cause a Larger Spending Fall during the Financial Crisis in the UK

“Household Debt Overhang Did Hardly Cause a Larger Spending Fall during the Financial Crisis in the UK,” April 2021, paper. CEPR Discussion Paper DP16059. NBER Working Paper 28806.

Abstract

The “debt-overhang hypothesis” – that households cut back more on their spending in a crisis when they have higher levels of outstanding mortgage debt (Dynan, 2012) – seems to be taken for granted by macroprudential authorities in several countries in their policy decisions, as well as by the international organizations that evaluate and comment on countries’ macroprudential policy. Results are presented for UK microdata that reject the debt-overhang hypothesis. The results instead support the “spending-normalization hypothesis” of Andersen, Duus, and Jensen (2016a), what can also be called the “debt-financed overspending” hypothesis – that the correlation between high pre-crisis household indebtedness and subsequent spending cuts  during the crisis reflects high debt-financed spending pre-crisis and a return to normal spending during the crisis. As discussed in Svensson (2019, 2020), this is consistent with the correlation reflecting debt-financed overspending through what Muellbauer (2012) calls the “housing-collateral household demand” and Mian and Sufi (2018) the “credit-driven household demand” channel. The correlation is thus spurious and an example of omitted-variable bias.

A simple model shows that consumption and debt changes are directly and strongly positively correlated, whereas consumption and debt levels are quite weakly negatively correlated. Importantly, and in contrast, examples show that there is no systematic relation between consumption cuts and levels of or changes in LTV ratios. The lack of a robust relation between consumption cuts and levels of or changes in LTV ratios implies that tests of these hypotheses should generally not be done by regressions of consumption cuts on levels of or changes in LTV ratios.

Amorteringskraven snedvrider och utestänger: Uppdatering

“Amorteringskraven snedvrider och utestänger: Uppdatering“, inlägg, Ekonomistas, 13 april 2021.

Trots att amorteringskraven saknar påvisbar samhällsnytta och medför stora individuella och sociala kostnader (se här, här och här) har Finansinspektions generaldirektör Erik Thedéen meddelat på DN-debatt att det tillfälliga undantaget från amorteringskraven löper ut i augusti. Amorteringskraven har stora och individuella kostnader, i och med att de snedvrider bostadsmarknaden och skapar höga trösklar för inträde för bostadssökande som saknar hög inkomst, förmögenhet och rika föräldrar, särskilt unga. De utestängs från bostäder som de mycket väl skulle ha råd med. Detta visas här med nya beräkningar – uppdaterade från 2017 till 2019 – av boendebetalningar och minsta inkomst för att få lån med olika amorteringsalternativ för en genomsnittlig etta i Stockholm kommun 2019 (”Stockholmsettan”). Den minsta inkomsten jämförs med inkomstfördelningen för 25–29-åringar i Stockholms kommun under 2019. Dessa beräkningar för 2017 har betecknats som ”överdrivna” av Thedéen.

Household Debt Overhang Did Hardly Cause a Larger Spending Fall during the Financial Crisis in Australia

“Household Debt Overhang Did Hardly Cause a Larger Spending Fall during the Financial Crisis in Australia,” April 2021, paper. CEPR Diskussion Paper DP16094. NBER Working Paper 28776

Abstract

The “debt-overhang hypothesis” – that households cut back more on their spending in a crisis when they have higher levels of outstanding mortgage debt (Dynan, 2012) – seems to be taken for granted by macroprudential authorities in several countries in their policy decisions, as well as by the international organizations that evaluate and comment on countries’ macroprudential policy. New results for Australian microdata are presented that reject the debt-overhang hypothesis. The results instead support the “spending-normalization hypothesis” of Andersen, Duus, and Jensen (2016), what can also be called the “debt-financed overspending” hypothesis – that the correlation between high pre-crisis household indebtedness and subsequent spending cuts during the crisis reflects high debt-financed spending pre-crisis and a return to normal spending during the crisis. As discussed in Svensson (2019, 2020), this is consistent with the above correlation reflecting debt-financed overspending through what Muellbauer (2012) calls the “housing-collateral household demand” channel and Mian and Sufi (2018) the “credit-driven household demand” channel.

Är verkligen hushållens skulder för höga?

“Är verkligen hushållens skulder för höga?“, inlägg, Ekonomistas, inlägg, 8 februari 2021.

Enligt en intervju i SvD den 6 februari vill nya finansmarknadsministern, Åsa Lindhagen, gärna se lägre skulder för hushållen. Men är verkligen hushållens skulder för höga? Vad ska de jämföras med? Hur kan man avgöra om de är för höga eller inte? Vad säger data?