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Housing Market Dynamics Under Stochastic Growth: An Application to the Housing Market in Boulder, Colorado

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  • Mary Riddel

Abstract

Recent housing‐market studies have modeled slow stock and price adjustment with some success. However, the empirical procedures used in these models break down if housing stocks or prices are driven by stochastic growth. In this paper I suggest an error‐correction model for analyzing housing supply and demand under conditions of stochastic growth for a regional housing market. The model is applied to the housing market in Boulder, Colorado from 1981 through 1995—a period of rapid growth in housing values in the area. Long‐run housing supply and demand are shown to be inelastic with respect to changes in the price of housing. The results indicate that developers respond more accurately to housing‐market disequilibrium attributable to supply‐side disturbances than to disturbances generated by changes in the demand for housing. On the other hand, price appreciation is driven primarily by demand disturbances.

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  • Mary Riddel, 2000. "Housing Market Dynamics Under Stochastic Growth: An Application to the Housing Market in Boulder, Colorado," Journal of Regional Science, Wiley Blackwell, vol. 40(4), pages 771-788, November.
    • Handle: RePEc:bla:jregsc:v:40:y:2000:i:4:p:771-788
    DOI: 10.1111/0022-4146.00198
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    Cited by:

    1. Mantu Kumar Mahalik & Hrushikesh Mallick, 2011. "What Causes Asset Price Bubble in an Emerging Economy? Some Empirical Evidence in the Housing Sector of India," International Economic Journal, Taylor & Francis Journals, vol. 25(2), pages 215-237.
    2. Sheng-Hau Lin & Jia-Hsun Li & Jing-Chzi Hsieh & Xianjin Huang & Jia-Tsong Chen, 2018. "Impact of Property Tax on Housing-Market Disequilibrium in Different Regions: Evidence from Taiwan for the period 1982–2016," Sustainability, MDPI, vol. 10(11), pages 1-18, November.
    3. W D A Bryant, 2009. "General Equilibrium:Theory and Evidence," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 6875, December.
    4. Paul Oslington, 2012. "General Equilibrium: Theory and Evidence," The Economic Record, The Economic Society of Australia, vol. 88(282), pages 446-448, September.
    5. Ball, Michael & Meen, Geoffrey & Nygaard, Christian, 2010. "Housing supply price elasticities revisited: Evidence from international, national, local and company data," Journal of Housing Economics, Elsevier, vol. 19(4), pages 255-268, December.

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