Regional housing supply and credit constraints
AbstractThe construction of new housing plays a critical role in the economy, yet it is understudied by researchers. Increases in housing starts raise construction employment, and recent home buyers often purchase other consumer durables, leading through the multiplier effect to increased employment. Construction is especially important to the business cycle, because changes in residential construction tend to lead recessions and recovery.> Despite its importance, empirical research on housing supply is surprisingly rare. This article presents a new empirical model of housing supply that reflects the land development process and is consistent with the time-series characteristics of the data. The authors apply this model to the four U.S. Census regions and estimate regional housing start elasticities, which range between 0.9 and 3.9. Their estimates also show a prolonged period of below-predicted construction in the Northeast during the early 1990s that does not appear during the downturns in other regions. These results are consistent with the hypothesis that a severe negative shock to local asset values (and thus bank capital), possibly combined with changes in banking regulation, let to a "credit crunch" that reduced new housing construction.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Federal Reserve Bank of Boston in its journal New England Economic Review.
Volume (Year): (1996)
Issue (Month): Nov ()
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Arthur Grimes & Andrew Aitken, 2006. "Housing Supply and Price Adjustment," Working Papers 06_01, Motu Economic and Public Policy Research.
- Christopher J. Mayer & C. Tsuriel Somerville, .
"Land Use Regulation and New Construction,"
Zell/Lurie Center Working Papers
331, Wharton School Samuel Zell and Robert Lurie Real Estate Center, University of Pennsylvania.
- Robert Edelstein & Desmond Tsang, 2007. "Dynamic Residential Housing Cycles Analysis," The Journal of Real Estate Finance and Economics, Springer, vol. 35(3), pages 295-313, October.
- James McGibany & Farrokh Nourzad, 2004. "Do lower mortgage rates mean higher housing prices?," Applied Economics, Taylor & Francis Journals, vol. 36(4), pages 305-313.
- Mayer, Christopher J. & Somerville, C. Tsuriel, 2000. "Residential Construction: Using the Urban Growth Model to Estimate Housing Supply," Journal of Urban Economics, Elsevier, vol. 48(1), pages 85-109, July.
- Markus K. Brunnermeier & Christian Julliard, 2006.
"Money Illusion and Housing Frenzies,"
NBER Working Papers
12810, National Bureau of Economic Research, Inc.
- Malpezzi, Stephen & Maclennan, Duncan, 2001. "The Long-Run Price Elasticity of Supply of New Residential Construction in the United States and the United Kingdom," Journal of Housing Economics, Elsevier, vol. 10(3), pages 278-306, September.
- Christopher J. Mayer & C. Tsuriel Somerville, 1996. "Unifying empirical and theoretical models of housing supply," Working Papers 96-12, Federal Reserve Bank of Boston.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Catherine Spozio).
If references are entirely missing, you can add them using this form.