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The Supply Side of the Housing Boom and Bust of the 2000s

In: Housing and the Financial Crisis

Author

Listed:
  • Andrew Haughwout
  • Richard W. Peach
  • John Sporn
  • Joseph Tracy

Abstract

The boom and subsequent bust in housing construction and prices over the 2000s is widely regarded as a principal contributor to the Financial Panic of 2007 and the subsequent Great Recession. As of this writing, housing market activity remains at depressed levels as the economy slowly resolves the legacy of excess supply and sharply lower prices. Over 2.6 million foreclosures have been completed since 2008 and 1.9 million foreclosures are in process. Much has been written about the demand side of this pronounced housing cycle, in particular, the innovations in mortgage finance and the loosening of underwriting standards that greatly expanded the pool of potential homebuyers. In this paper, we take a closer look at developments on the supply side of the housing market. Following a short literature review, we begin with a descriptive review of housing production, sales, and prices at the national, regional, and state levels. We then look at developments in the homebuilding industry over this period. We also take a closer look at land markets using a quarterly price index for metropolitan statistical areas with both elastic and inelastic housing supplies across the United States. An important question is to what extent the supply side of the market contributed to the boom/bust dynamics. A second question is whether the significant changes in the industrial organization of the homebuilding industry exacerbated or ameliorated this supply impact.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Andrew Haughwout & Richard W. Peach & John Sporn & Joseph Tracy, 2012. "The Supply Side of the Housing Boom and Bust of the 2000s," NBER Chapters, in: Housing and the Financial Crisis, pages 69-104, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:12620
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    References listed on IDEAS

    as
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The Housing Market Can Boom, Once You Move Out Of Your Mom’s Basement
      by Mark Bergen in Mark Bergen (Econometro) on 2011-12-20 22:06:17

    Citations

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    Cited by:

    1. Zhenyu Gao & Michael Sockin & Wei Xiong, 2019. "Economic Consequences of Housing Speculation," NBER Working Papers 26457, National Bureau of Economic Research, Inc.
    2. Matthew Rognlie & Andrei Shleifer & Alp Simsek, 2018. "Investment Hangover and the Great Recession," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(2), pages 113-153, April.
    3. Knut Are Aastveit & Bruno Albuquerque & André Anundsen, 2019. "Changing supply elasticities and regional housing booms," Working Paper 2019/8, Norges Bank.
    4. Crocker H. Liu & Adam Nowak & Stuart Rosenthal, 2014. "Bubbles, Post-Crash Dynamics, and the Housing Market," Working Papers 14-18, Department of Economics, West Virginia University.
    5. Juan Carmona & Markus Lampe & Joan Rosés, 2017. "Housing affordability during the urban transition in Spain," Economic History Review, Economic History Society, vol. 70(2), pages 632-658, May.
    6. Todd Sinai, 2012. "House Price Moments in Boom-Bust Cycles," NBER Chapters, in: Housing and the Financial Crisis, pages 19-68, National Bureau of Economic Research, Inc.
    7. Itzhak Ben-David & Pascal Towbin & Sebastian Weber, 2019. "Expectations During the U.S. Housing Boom: Inferring Beliefs from Actions," NBER Working Papers 25702, National Bureau of Economic Research, Inc.
    8. Hyunseung Oh & Chamna Yoon, 2016. "Residential construction lags across the US and their implications for housing supply," Vanderbilt University Department of Economics Working Papers 16-00002, Vanderbilt University Department of Economics.
    9. Narayan Bulusu & Jefferson Duarte & Carles Vergara-Alert, 2013. "Booms and Busts in House Prices Explained by Constraints in Housing Supply," Staff Working Papers 13-18, Bank of Canada.
    10. Dillender, Marcus & McInerney, Melissa, 2020. "The role of Mexican immigration to the United States in improved workplace safety for natives from 1980 to 2015," Journal of Health Economics, Elsevier, vol. 70(C).
    11. Dieci, Roberto & Westerhoff, Frank, 2015. "Heterogeneous expectations, boom-bust housing cycles, and supply conditions: A nonlinear dynamics approach," BERG Working Paper Series 99, Bamberg University, Bamberg Economic Research Group.
    12. Andrew F. Haughwout & Sarah Sutherland & Joseph Tracy, 2013. "Negative equity and housing investment," Staff Reports 636, Federal Reserve Bank of New York.
    13. Liu, Crocker H. & Nowak, Adam & Rosenthal, Stuart S., 2016. "Housing price bubbles, new supply, and within-city dynamics," Journal of Urban Economics, Elsevier, vol. 96(C), pages 55-72.

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