MBS MODULE MODULE 6

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MBS MODULEMODULE 6

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Figure I A Schematic View of the Housing Market
HOUSEHOLDS
Vacancies
Consumer Tastes and Demographic Variables
STOCK DEMAND FOR HOUSING
Stock Supply of Housing
Conversions, Demolitions, and Removal
Tax System
Housing Services Prices and Rental Rates
Real Wealth and Income
Real User Costs
Relative Prices
Mortgage Financing Terms
PRODUCTION DECISIONS Balancing Risk and Return
Tax Treatment

• PRIVATE FINANCIAL INSTITUTIONS
• Portfolio Size and
• Composition of Portfolio
• Growth of Portfolios
• Relative Ratios of Return in
• General Capital Market

Construction Activity New Units, Additions, and
Alterations
Expected Construction Costs and Operating
Expense

• PUBLIC SECTOR
• Housing Policy
• Monetary Policy
• Fiscal Policy
• Tax Policy
• Economic Environment
• Inflationary Expectations

Earnings of Factors of Production, including
Materials, labor, and land
Non-Residential Real Estate Activity
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LONG TERM GNP TREND VERSUSCYCLE BEHAVIOR
REAL GNP
TREND LINE
ACTUAL GNP MOVEMNTS
TIME
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TYPICAL GNP CYCLE (DE-TRENDED DATA)GNP
REFERENCE CYCLE
REAL GNP
PEAK
TREND LINE
TROUGH
TIME
PHASE III
PHASE II
PHASE I
Phase I is the Upturn (Recovery) Period. Phase II
is the Steady Growth Period. Phase III is the
Downturn (Recession Period).
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CYCLICAL PATTERNS OF THE COMPENENTS OF FIXED
INVESTMENT
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A RESIDUAL USER HYPOTHESISCREDIT CONSTRAINT
CREDIT
TOTAL AVAILABLE CREDIT
CREDIT D FOR Ip
GNP REFERENCE CYCLE
TIME
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CREDIT
TOTAL AVAILABLE CREDIT
DCd
DIp
GNP REFERENCE CYCLE
TIME
DCd Demand for Credit for Consumer Durables DIp
Demand for Credit for Investment in Plants
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EXCEL GRAPH(III-90)
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RELATIONSHIP BETWEEN FIXED (NON-RESIDENTIAL)
INVESTMENT AND GNP