TY  - JOUR
AU  - Glaeser,Edward L.
AU  - Gyourko,Joseph
AU  - Saiz,Albert
TI  - Housing Supply and Housing Bubbles
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14193
PY  - 2008
Y2  - July 2008
UR  - http://www.nber.org/papers/w14193
L1  - http://www.nber.org/papers/w14193.pdf
N1  - Author contact info:
Edward L. Glaeser
Department of Economics
315A Littauer Center
Harvard University
Cambridge, MA 02138
Tel: 617/495-0575
Fax: 617/495-7730
E-Mail: eglaeser@harvard.edu

Joseph Gyourko
University of Pennsylvania
Wharton School of Business
3620 Locust Walk
1480 Steinberg-Dietrich Hall
Philadelphia, PA 19104-6302
Tel: 215/898-3003
Fax: 215/573-2220
E-Mail: gyourko@wharton.upenn.edu

Albert Saiz
Real Estate Department, The Wharton School
UPENN, 1466 Steinberg Hall-Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104-6302
E-Mail: saiz@wharton.upenn.edu
AB  - 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.
ER  -