A new IMF Working Paper by Alter, Mahoney and Badarinza concludes that—focusing on the long-run trends—a one percent increase in vacancy rates leads to a temporary drop of 0.5 percent to 0.6 percent in CRE prices over the following quarter. Furthermore, a one-standard deviation (one sigma) tightening in financial conditions is associated with a 2.5 percent to three percent decline in CRE prices, according to the paper.

Last Updated on January 28, 2023 by Ramin Seddiq