NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Housing Supply and Housing Bubbles

Edward L. Glaeser, Joseph Gyourko, Albert Saiz

NBER Working Paper No. 14193
Issued in July 2008
NBER Program(s):   PE

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.

download in pdf format
   (263 K)

email paper

This paper is available as PDF (263 K) or via email.

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w14193

Published: Glaeser, Edward L. & Gyourko, Joseph & Saiz, Albert, 2008. "Housing supply and housing bubbles," Journal of Urban Economics, Elsevier, vol. 64(2), pages 198-217, September.

Users who downloaded this paper also downloaded these:
Glaeser, Gyourko, and Molloy w11097 Urban Growth and Housing Supply
Himmelberg, Mayer, and Sinai w11643 Assessing High House Prices: Bubbles, Fundamentals, and Misperceptions
Abraham and Hendershott w4774 Bubbles in Metropolitan Housing Markets
Glaeser, Gottlieb, and Gyourko w16230 Can Cheap Credit Explain the Housing Boom?
Glaeser and Gyourko w12787 Housing Dynamics
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us