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Changing supply elasticities and regional housing booms

Author

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  • Aastveit, Knut Are

    (Norges Bank and BI Norwegian Business School)

  • Albuquerque, Bruno

    (Bank of England)

  • Anundsen, André

    (Housing Lab, Oslo Metropolitan University)

Abstract

Recent developments in US house prices mirror those of the 1996–2006 boom, but the recovery in construction activity has been weak. Using data for 254 US metropolitan areas, we show that housing supply elasticities have fallen markedly in recent years. Consistent with this, we find that monetary policy shocks have a stronger effect on house prices during the recent recovery than the previous boom. At the same time, building permits respond less. Finally, we find that housing supply elasticities have declined more in areas where land-use regulation has tightened the most, and in areas that experienced the sharpest housing busts.

Suggested Citation

  • Aastveit, Knut Are & Albuquerque, Bruno & Anundsen, André, 2020. "Changing supply elasticities and regional housing booms," Bank of England working papers 844, Bank of England.
    • Handle: RePEc:boe:boeewp:0844
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    3. Bandoni, Emil & De Nora, Giorgia & Giuzio, Margherita & Ryan, Ellen & Storz, Manuela, 2025. "Institutional investors and house prices," Working Paper Series 3026, European Central Bank.
    4. Bruno Albuquerque & Martin Iseringhausen & Frederic Opitz, 2024. "The Housing Supply Channel of Monetary Policy," IMF Working Papers 2024/023, International Monetary Fund.
    5. Anthony W. Orlando & Christian L. Redfearn, 2024. "Houston, you have a problem: How large cities accommodate more housing," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 52(4), pages 1045-1074, July.
    6. Gong, Yifan & Yao, Yuxi, 2022. "Demographic changes and the housing market," Regional Science and Urban Economics, Elsevier, vol. 95(C).
    7. Battistini, Niccolò & Falagiarda, Matteo & Hackmann, Angelina & Roma, Moreno, 2025. "Navigating the housing channel of monetary policy across euro area regions," European Economic Review, Elsevier, vol. 171(C).
    8. Egan, Paul & McQuinn, Kieran, 2023. "Monetary tightening in the Euro Area: Implications for residential investment," Papers WP767, Economic and Social Research Institute (ESRI).
    9. Chi-Young Choi & Soojin Jo, 2020. "How Do Housing Markets Affect Local Consumer Prices? – Evidence from U.S. Cities," Globalization Institute Working Papers 398, Federal Reserve Bank of Dallas.
    10. Dreger, Christian & Gerdesmeier, Dieter & Roffia, Barbara, 2020. "The impact of credit for house price overvaluations in the euro area: Evidence from threshold models," MPRA Paper 99523, University Library of Munich, Germany.
    11. Tran, My & Gannon, Brenda & Rose, Christiern, 2023. "The effect of housing wealth on older adults’ health care utilization: Evidence from fluctuations in the U.S. housing market," Journal of Health Economics, Elsevier, vol. 88(C).
    12. Albuquerque, Bruno & Iseringhausen, Martin & Opitz, Frederic, 2020. "Monetary policy and US housing expansions: The case of time-varying supply elasticities," Economics Letters, Elsevier, vol. 195(C).
    13. Guillaume Chapelle & J.B. Eyméoud & C. Wolf, 2023. "Land-use regulation and housing supply elasticity: evidence from France," THEMA Working Papers 2023-08, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    14. Maximilian Günnewig‐Mönert & Ronan C. Lyons, 2024. "Housing prices, costs, and policy: The housing supply equation in Ireland since 1970," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 52(4), pages 1075-1102, July.

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    More about this item

    Keywords

    House prices; heterogeneity; housing supply elasticities; monetary policy;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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