Housing Supply and Housing Bubbles

By Edward L. Glaeser, Joseph Gyourko, Albert Saiz. 2008

985 citations recorded by the source corpus.

Like many other assets, housing prices are quite volatile relative to observable changes in fundamentals. If we are going to understand boom-bust housing cycles, we must incorporate housing supply. In this paper, we present a simple model of housing bubbles that predicts that places with more elastic housing supply have fewer and shorter bubbles, with smaller price increases. However, the welfare consequences of bubbles may actually be higher in more elastic places because those places will overbuild more in response to a bubble. The data show that the price run-ups of the 1980s were almost exclusively experienced in cities where housing supply is more inelastic. More elastic places had slightly larger increases in building during that period. Over the past five years, a modest number of more elastic places also experienced large price booms, but as the model suggests, these booms seem to have been quite short. Prices are already moving back towards construction costs in those areas.

Subfields: Accounting, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/fa5b48c181a5600214e2b9a798d686b324b7c00f

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Citations in the corpus

A Real Estate Boom with Chinese Characteristics (2016, background): “These are typically large, industrialized, and have relatively strong local economies.”
Land supply, pricing and local governments' land hoarding in China (2014, background): “Recent studies have proved the importance of land supply as a cause of housing price increases and the risk of a housing bubble (Glaeser et al., 2008; Goodman and Thibodeau, 2008).”
Forecasting real estate prices (2012, methodology): “For instance, the stringency of the regulatory environment raises prices consistently, suggesting that supply shocks are important in determininghouse price dynamics (Glaeser, Gyourko, and Saiz (2008)).”
Housing and Liquidity (2015, background): “…Shiller (2011), that “The housingprice boom of the 2000’s was little more than a construction-supply bottleneck, an inability to satisfy investment demand fast enough, and was (or in some places will be) eliminated with massive increases in supply” (see also Glaeser, Gyourko, and Saiz (2008)).”
The Price Responsiveness of Housing Supply in OECD Countries (2013, result): “This finding is in line with evidence by Glaeser et al. (2008) which suggests that housing prices increase more during “bubbles” and housing price “bubbles” are more common and last longer in areas where supply is inelastic.”
Supply Constraints and Housing Market Dynamics (2013, background): “…finding generally accords with my own, I do not focus exclusively on the most recent cycle, precisely because some of the largest price swings occurred in relatively unconstrained cities like Las Vegas, which is hard to square with a supply-side explanation alone (Glaeser, Gyourko and Saiz 2008).”
Importing Political Polarization? The Electoral Consequences of Rising Trade Exposure (2020, result): “Though we cannot cleanly differentiate the resource-based versus opportunism-based explanations for why trade shocks appear to amplify political cleavages along racial lines, our earlier findings that trade shocks raise both voter turnout and individual-level campaign contributions are consistent wi”
House Price Booms and the Current Account (2012, background): “Therefore, Glaeser, Gyourko, and Saiz (2008) previously suggested that models of learning can help resolve this empirical puzzle.”
Supply Elasticity and the Housing Cycle of the 2000s (2013, positive): “By contrast, Glaeser et al. (2008) emphasize that there were few large cycles in the 1980s in elastically supplied US markets.”
Current account patterns and national real estate markets (2008, positive): “Glaeser et al. (2008) pointed out the role of the supply side in accounting for recent boom–bust cycles.”