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Housing Supply, Land Costs and Price Adjustment

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  • Arthur Grimes
  • Andrew Aitken

Abstract

We analyze relationships between housing supply elasticities, land costs and house price dynamics, contributing three main insights. First, higher housing supply elasticities help contain short-run price spikes following demand shocks. Second, land price dynamics influence this relationship; supply responses are lessened and house price spikes are exacerbated as land prices increase. Third, we estimate a system of regional equations modeling housing supply using a Tobin's-"q" specification (incorporating construction and land costs) and show that regional price dynamics are a function of the region's supply elasticity. Copyright (c) 2010 American Real Estate and Urban Economics Association.

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Bibliographic Info

Article provided by American Real Estate and Urban Economics Association in its journal Real Estate Economics.

Volume (Year): 38 (2010)
Issue (Month): 2 ()
Pages: 325-353

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Handle: RePEc:bla:reesec:v:38:y:2010:i:2:p:325-353

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Cited by:
  1. Arthur Grimes & Sean Hyland, 2013. "Housing Market Dynamics and the GFC: The Complex Dynamics of a Credit Shock," Working Papers 13_12, Motu Economic and Public Policy Research.
  2. Bourassa, Steven C. & Hoesli, Martin & Scognamiglio, Donato & Zhang, Sumei, 2011. "Land leverage and house prices," Regional Science and Urban Economics, Elsevier, vol. 41(2), pages 134-144, March.
  3. Arthur Grimes & Sean Hyland & Andrew Coleman & James Kerr & Alex Collier, 2013. "A New Zealand Regional Housing Model," Working Papers 13_02, Motu Economic and Public Policy Research.
  4. Oliver Lerbs, 2012. "House Prices, Housing Development Costs, and the Supply of New Single-Family Housing in German Counties and Cities," ERSA conference papers ersa12p258, European Regional Science Association.
  5. Oliver Lerbs, . "House Prices, Housing Development Costs, and the Supply of New Single-Family Housing in German Counties and Cities," Working Papers 201283, Institute of Spatial and Housing Economics, Munster Universitary.
  6. Arthur Grimes & Mark Holmes, 2010. "New Zealand Housing Markets: Just a Bit-Player in the A-League?," Working Papers 10_07, Motu Economic and Public Policy Research.
  7. Lerbs, Oliver W., 2012. "House prices, housing development costs, and the supply of new single-family housing in German counties and cities," CAWM Discussion Papers 57, Center of Applied Economic Research Münster (CAWM), University of Münster.

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