IDEAS home Printed from https://ideas.repec.org/p/cfe/wpcefa/2011_18.html
   My bibliography  Save this paper

New housing supply: what do we know and how can we learn more?

Author

Listed:
  • Pedro M. M. L. Garcês

    (ESGHT, Universidade do Algarve, Portugal)

  • Cesaltina Pacheco Pires

    (CEFAGE-UE and Departamento de Gestão, Universidade de Évora, Portugal)

Abstract

This paper reviews the literature on new housing supply. The paper starts by summarizing the results of the empirical studies on housing supply, showing that overall these studies reject the hypothesis of a perfectly elastic housing supply and reveal that housing supply is negatively related with financial costs, inflation and sales delay while showing inconclusive results with respect to the construction costs. In addition, we review a recent branch of the literature on housing supply that uses strategic interaction models. There is evidence that the housing market is not well described by the perfect competition model. Thus, a deeper understanding of housing supply can be achieved by considering theoretical models that take into account the strategic interaction between land developers and by using data where the unit of analysis is the land developer.

Suggested Citation

  • Pedro M. M. L. Garcês & Cesaltina Pacheco Pires, 2011. "New housing supply: what do we know and how can we learn more?," CEFAGE-UE Working Papers 2011_18, University of Evora, CEFAGE-UE (Portugal).
    • Handle: RePEc:cfe:wpcefa:2011_18
    as

    Download full text from publisher

    File URL: http://www.cefage.uevora.pt/en/content/download/2798/37548/version/1/file/2011_18.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. DiPasquale Denise & Wheaton William C., 1994. "Housing Market Dynamics and the Future of Housing Prices," Journal of Urban Economics, Elsevier, vol. 35(1), pages 1-27, January.
    2. Richard K. Green & Stephen Malpezzi & Stephen K. Mayo, 2005. "Metropolitan-Specific Estimates of the Price Elasticity of Supply of Housing, and Their Sources," American Economic Review, American Economic Association, vol. 95(2), pages 334-339, May.
    3. James M. Poterba, 1984. "Tax Subsidies to Owner-Occupied Housing: An Asset-Market Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(4), pages 729-752.
    4. Stuart S. Rosenthal, 1999. "Residential Buildings And The Cost Of Construction: New Evidence On The Efficiency Of The Housing Market," The Review of Economics and Statistics, MIT Press, vol. 81(2), pages 288-302, May.
    5. Goodman, John L, Jr, 1998. "Aggregation of Local Housing Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 16(1), pages 43-53, January.
    6. DiPasquale, Denise, 1999. "Why Don't We Know More about Housing Supply?," The Journal of Real Estate Finance and Economics, Springer, vol. 18(1), pages 9-23, January.
    7. Ko Wang & Yuqing Zhou, 2000. "Overbuilding: A Game-Theoretic Approach," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 28(3), pages 493-522.
    8. C. Tsuriel Somerville, 1999. "The Industrial Organization of Housing Supply: Market Activity, Land Supply and the Size of Homebuilder Firms," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 27(4), pages 669-694, December.
    9. Michael Ball, 2003. "Markets and the Structure of the Housebuilding Industry: An International Perspective," Urban Studies, Urban Studies Journal Limited, vol. 40(5-6), pages 897-916, May.
    10. DiPasquale, Denise & Wheaton, William C., 1992. "The cost of capital, tax reform, and the future of the rental housing market," Journal of Urban Economics, Elsevier, vol. 31(3), pages 337-359, May.
    11. Anglin, Paul M & Arnott, Richard, 1991. "Residential Real Estate Brokerage as a Principal-Agent Problem," The Journal of Real Estate Finance and Economics, Springer, vol. 4(2), pages 99-125, June.
    12. 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.
    13. YongQiang Chu & Tien Sing, 2007. "Optimal Timing of Real Estate Investment under an Asymmetric Duopoly," The Journal of Real Estate Finance and Economics, Springer, vol. 34(3), pages 327-345, April.
    14. Christopher J. Mayer & C. Tsuriel Somerville, 1996. "Unifying empirical and theoretical models of housing supply," Working Papers 96-12, Federal Reserve Bank of Boston.
    15. Kenny, Geoff, 1999. "Modelling the demand and supply sides of the housing market: evidence from Ireland1," Economic Modelling, Elsevier, vol. 16(3), pages 389-409, August.
    16. Joseph Gyourko, 2009. "Housing Supply," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 295-318, May.
    17. Capozza, Dennis R. & Helsley, Robert W., 1989. "The fundamentals of land prices and urban growth," Journal of Urban Economics, Elsevier, vol. 26(3), pages 295-306, November.
    18. Blackley, Dixie M, 1999. "The Long-Run Elasticity of New Housing Supply in the United States: Empirical Evidence for 1950 to 1994," The Journal of Real Estate Finance and Economics, Springer, vol. 18(1), pages 25-42, January.
    19. de Leeuw, Frank & Ekanem, Nkanta F, 1971. "The Supply of Rental Housing," American Economic Review, American Economic Association, vol. 61(5), pages 806-817, December.
    20. Falk, Barry L. & Lee, Bong-Soo, 2004. "The Inventory-Sales Relationship in the Market for New Single-Family Homes," Staff General Research Papers Archive 12006, Iowa State University, Department of Economics.
    21. Olsen, Edgar O., 1987. "The demand and supply of housing service: A critical survey of the empirical literature," Handbook of Regional and Urban Economics, in: E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 2, chapter 25, pages 989-1022, Elsevier.
    22. Gwilym Pryce, 1999. "Construction Elasticities and Land Availability: A Two-stage Least-squares Model of Housing Supply Using the Variable Elasticity Approach," Urban Studies, Urban Studies Journal Limited, vol. 36(13), pages 2283-2304, December.
    23. Smith, Lawrence B & Rosen, Kenneth T & Fallis, George, 1988. "Recent Developments in Economic Models of Housing Markets," Journal of Economic Literature, American Economic Association, vol. 26(1), pages 29-64, March.
    24. Topel, Robert H & Rosen, Sherwin, 1988. "Housing Investment in the United States," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 718-740, August.
    25. 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.
    26. Fathali Firoozi & Daniel R. Hollas & Ronald C. Rutherford & Thomas A. Thomson, 2006. "Property Assessments and Information Asymmetry in Residential Real Estate," Journal of Real Estate Research, American Real Estate Society, vol. 28(3), pages 275-292.
    27. Rosenthal, Stuart S, 1999. "Housing Supply: The Other Half of the Market a Note from the Editor," The Journal of Real Estate Finance and Economics, Springer, vol. 18(1), pages 5-7, January.
    28. Barry Falk & Bong‐Soo Lee, 2004. "The Inventory–Sales Relationship in the Market for New Single‐Family Homes," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 32(4), pages 645-672, December.
    29. Follain James R. & Leavens Donald R. & Velz Orawin T., 1993. "Identifying the Effects of Tax Reform on Multifamily Rental Housing," Journal of Urban Economics, Elsevier, vol. 34(2), pages 275-298, September.
    30. Didier Baudewyns, 2000. "Opening the black box of strategic interactions of land developpers," ULB Institutional Repository 2013/9163, ULB -- Universite Libre de Bruxelles.
    31. James R. Follain, Jr., 1979. "The Price Elasticity of the Long-Run Supply of New Housing Construction," Land Economics, University of Wisconsin Press, vol. 54(2), pages 190-199.
    32. Seow Eng Ong & Tien Foo Sing & Lai Choo Malone‐Lee, 2004. "Strategic considerations in land use planning: the case of white sites in Singapore," Journal of Property Research, Taylor & Francis Journals, vol. 21(3), pages 235-253, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Łaszek, Jacek & Olszewski, Krzysztof, 2014. "The behaviour of housing developers and aggregate housing supply," MPRA Paper 60478, University Library of Munich, Germany.
    2. Tim Meyer, 2019. "On the Directional Accuracy of United States Housing Starts Forecasts: Evidence from Survey Data," The Journal of Real Estate Finance and Economics, Springer, vol. 58(3), pages 457-488, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Richard K. Green & Stephen Malpezzi & Stephen K. Mayo, 2005. "Metropolitan-Specific Estimates of the Price Elasticity of Supply of Housing, and Their Sources," American Economic Review, American Economic Association, vol. 95(2), pages 334-339, May.
    2. 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.
    3. 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.
    4. 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.
    5. Anthony Owusu-Ansah, 2012. "Modelling the supply of new residential construction for local housing markets and estimation of housing supply price elasticities: The case of Aberdeen, UK," ERES eres2012_097, European Real Estate Society (ERES).
    6. Lozano Navarro, Francisco-Javier, 2015. "Elasticidad precio de la oferta inmobiliaria en el Gran Santiago [Housing supply elasticity in Greater Santiago]," MPRA Paper 65012, University Library of Munich, Germany.
    7. Oliver W. Lerbs, 2014. "House prices, housing development costs, and the supply of new single-family housing in German counties and cities," Journal of Property Research, Taylor & Francis Journals, vol. 31(3), pages 183-210, September.
    8. Oliver Lerbs, "undated". "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.
    9. Oikarinen, Elias & Peltola, Risto & Valtonen, Eero, 2015. "Regional variation in the elasticity of supply of housing, and its determinants: The case of a small sparsely populated country," Regional Science and Urban Economics, Elsevier, vol. 50(C), pages 18-30.
    10. Christopher J. Mayer & C. Tsuriel Somerville, 1996. "Unifying empirical and theoretical models of housing supply," Working Papers 96-12, Federal Reserve Bank of Boston.
    11. Arthur Grimes & Andrew Aitken, 2010. "Housing Supply, Land Costs and Price Adjustment," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 38(2), pages 325-353, June.
    12. Wouter Vermeulen & Jan Rouwendal, 2007. "Housing supply in the Netherlands," CPB Discussion Paper 87, CPB Netherlands Bureau for Economic Policy Analysis.
    13. Brent W. Ambrose & Joe Peek, 2008. "Credit Availability and the Structure of the Homebuilding Industry," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 36(4), pages 659-692, December.
    14. Wouter Vermeulen & Jan Rouwendal, 2007. "Housing Supply and Land Use Regulation in the Netherlands," Tinbergen Institute Discussion Papers 07-058/3, Tinbergen Institute.
    15. 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, University of Münster, Münster Center for Economic Policy (MEP).
    16. Goodman, Allen C. & Thibodeau, Thomas G., 2008. "Where are the speculative bubbles in US housing markets?," Journal of Housing Economics, Elsevier, vol. 17(2), pages 117-137, June.
    17. Harter-Dreiman, Michelle, 2004. "Drawing inferences about housing supply elasticity from house price responses to income shocks," Journal of Urban Economics, Elsevier, vol. 55(2), pages 316-337, March.
    18. Arthur Grimes & Andrew Aitken, 2006. "Housing Supply and Price Adjustment," Working Papers 06_01, Motu Economic and Public Policy Research.
    19. Caldera, Aida & Johansson, Åsa, 2013. "The price responsiveness of housing supply in OECD countries," Journal of Housing Economics, Elsevier, vol. 22(3), pages 231-249.
    20. Wouter Vermeulen & Jan Rouwendal, 2007. "Housing supply in the Netherlands," CPB Discussion Paper 87.rdf, CPB Netherlands Bureau for Economic Policy Analysis.

    More about this item

    Keywords

    Housing supply; price elasticity of supply; strategic interaction.;
    All these keywords.

    JEL classification:

    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cfe:wpcefa:2011_18. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Angela Pacheco (email available below). General contact details of provider: https://edirc.repec.org/data/cfevopt.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.