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Dr. Seth Giertz Housing Market Research Featured in Wall Street Journal

Dr. Seth Giertz, assistant professor of economics at the University of Nebraska–Lincoln College of Business Administration, had his research featured in The Wall Street Journal this month. His article entitled “Preventing House Price Bubbles” originally appeared in the Policy Focus Report of the Lincoln Institute of Land Policy. He examined housing policymaking in metropolitan areas to see what future steps could be taken to prevent ongoing difficulties in the housing market. 
 
Giertz,  who co-authored the article with Dr. James Follian, a senior fellow at the Rockefeller Institute of Government,believes the Housing Affordable Modification Program (HAMP) did not have sufficient tools for measuring and managing the housing crisis when it was developed in 2007.

“The design of HAMP rested upon a number of critical judgments about borrower and lender behavior made without benefit of strong empirical support,” argue Giertz and Follian.

Seth Giertz
The authors suggest four critical steps for dealing with future crises including better focus on hardest-hit markets, longer-term forecasts of house prices in local markets, efforts to foster more cooperation in all levels of government and more recognition of the weaknesses inherent in securitization.

The research indicates reliance on monetary policy to combat unsustainable price increases is not the best solution to price problems.

“Monetary policy is of limited use in this arena, given that price appreciation varies so widely across local markets. Countercyclical capital buffers–which would raise capital requirements for financial institutions during the initial stages of the price bubble and reduce them during the period of decline–are a much more promising policy direction because they could be designed to put the brakes on only in those markets where bubbles appear to be developing,” according to the authors.

The research asserts that the growing availability of geographically granular data make this approach to bubble prevention much more viable than in the past.

Giertz joined CBA in 2008, and has research expertise in urban economics, public finance, taxation and applied microeconomics.

Published: July 11, 2013