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U.S. Housing as a Global Safe Asset: Evidence from China Shocks

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Abstract
This paper demonstrates that the measured stock of China's holding of U.S. assets could be much higher than indicated by the U.S. net international investment position data due to unrecorded historical Chinese inflows into an increasingly popular global safe haven asset: U.S. residential real estate. We first use aggregate capital flows data to show that the increase in unrecorded capital inflows in the U.S. balance of payment accounts over the past decade is mainly linked to inflows from China into U.S. housing markets. Then, using a unique web traffic dataset that provides a direct measure of Chinese demand for U.S. housing at the zip code level, we estimate via a difference-in-difference matching framework that house prices in major U.S. cities that are highly exposed to demand from China have on average grown 7 percentage points faster than similar neighborhoods with low exposure over the period 2010-2016. These average excess price growth gaps co-move closely with macro-level measures of U.S. capital inflows from China, and tend to widen following periods of economic stress in China, suggesting that Chinese households view U.S. housing as a safe haven asset.

Suggested Citation

  • William Barcelona & Nathan Converse & Anna Wong, 2021. "U.S. Housing as a Global Safe Asset: Evidence from China Shocks," International Finance Discussion Papers 1332, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgif:1332
    DOI: 10.17016/IFDP.2021.1332
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    Cited by:

    1. Jack Favilukis & Stijn Van Nieuwerburgh, 2021. "Out‐of‐Town Home Buyers and City Welfare," Journal of Finance, American Finance Association, vol. 76(5), pages 2577-2638, October.

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    More about this item

    Keywords

    China; Housing and real estate; Capital flows; Safe assets;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F60 - International Economics - - Economic Impacts of Globalization - - - General
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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