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Anatomy of a Market Crash: Suburban Housing Supply in California: 1989 - 1994

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  • David Dale-Johnson

Abstract

Prices of existing houses peaked in southern California during the second quarter of 1990 andpreceded a lengthy recession. This paper examines the response of homebuilders in a masterplanned community in the suburban Los Angeles region to the end of the boom and the onsetand deepening of the recession. There has been little research which has focused at the microlevel on builders’ responses to changes in market conditions. This paper will employ data frommaster planned community home builders in Riverside County between 1989 and 1994 toexamine the dynamics of the market. This analysis sheds some light on the volatility of housingstarts not attributable to price changes in previous studies. For example, builders are found toshift to producing low cost or lower priced housing units presumably in response to changingconsumer preferences. This adjustment does not arise from design changes but simplyproducing more of less expensive product that had already been planned and curtailingproduction of higher priced houses.

Suggested Citation

  • David Dale-Johnson, 1999. "Anatomy of a Market Crash: Suburban Housing Supply in California: 1989 - 1994," Working Paper 8652, USC Lusk Center for Real Estate.
    • Handle: RePEc:luk:wpaper:8652
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    File URL: http://lusk.usc.edu/sites/default/files/working_papers/wp_1999_116.pdf
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    References listed on IDEAS

    as
    1. David Dale‐Johnson & Stanley W. Hamilton, 1998. "Housing Market Conditions, Listing Choice and MLS Market Share," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 26(2), pages 275-307, June.
    2. Karl E. Case & Robert J. Shiller, 1994. "A decade of boom and bust in the prices of single-family homes: Boston and Los Angeles, 1983 to 1993," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 40-51.
    3. 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.
    4. John L. Goodman, 1987. "Housing and the Weather," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 15(1), pages 638-663, March.
    5. Amin Kaushik & Capozza Dennis R., 1993. "Sequential Development," Journal of Urban Economics, Elsevier, vol. 34(2), pages 142-158, September.
    6. Wheaton, William C., 1982. "Urban residential growth under perfect foresight," Journal of Urban Economics, Elsevier, vol. 12(1), pages 1-21, July.
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