IDEAS home Printed from https://ideas.repec.org/p/fip/fedgfe/2024-10.html
   My bibliography  Save this paper

Land development and frictions to housing supply over the business cycle

Author

Abstract

Using a novel data set of U.S. residential land developments, we document that the average time to develop residential properties-which includes both the time spent preparing land infrastructures and construction-is about three years, consistent with sizable lags in housing investment projects. We show that the time to develop is highly dispersed across locations, a finding that helps quantify the housing supply elasticity that is relevant for assessing local housing variations over the business cycle. We also show that incorporating long and dispersed time to develop into an otherwise standard housing investment model helps rationalize some empirical facts on the housing market. Our model implies that policies to boost housing supply are less effective in immediately stabilizing house prices for regions where land development takes a long time.

Suggested Citation

  • Hyunseung Oh & Choongryul Yang & Chamna Yoon, 2024. "Land development and frictions to housing supply over the business cycle," Finance and Economics Discussion Series 2024-010, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:2024-10
    DOI: 10.17016/FEDS.2024.010
    as

    Download full text from publisher

    File URL: https://www.federalreserve.gov/econres/feds/files/2024010pap.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.17016/FEDS.2024.010?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Matthias Meier, 2020. "Supply Chain Disruptions, Time to Build, and the Business Cycle," CRC TR 224 Discussion Paper Series crctr224_2020_160, University of Bonn and University of Mannheim, Germany.
    2. Adam Guren & Alisdair McKay & Emi Nakamura & Jón Steinsson, 2021. "What Do We Learn from Cross-Regional Empirical Estimates in Macroeconomics?," NBER Macroeconomics Annual, University of Chicago Press, vol. 35(1), pages 175-223.
    3. Davidoff, Thomas, 2016. "Supply Constraints Are Not Valid Instrumental Variables for Home Prices Because They Are Correlated With Many Demand Factors," Critical Finance Review, now publishers, vol. 5(2), pages 177-206, December.
    4. Joseph Gyourko & Edward L. Glaeser, 2008. "Rethinking Federal Housing Policy," Books, American Enterprise Institute, number 50499, September.
    5. Alvin Murphy, 2018. "A Dynamic Model of Housing Supply," American Economic Journal: Economic Policy, American Economic Association, vol. 10(4), pages 243-267, November.
    Full references (including those not matched with items on IDEAS)

    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. Murray, Cameron K., 2020. "Time is money: How landbanking constrains housing supply," Journal of Housing Economics, Elsevier, vol. 49(C).
    2. Murray, Cameron & Phibbs, Peter, 2022. "Evidence-lite zone: The weak evidence behind the economic case against planning regulation," OSF Preprints 69m23, Center for Open Science.
    3. Wall, Howard, 2023. "The Great, Greater, and Greatest Recessions of US States," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 53(1), January.
    4. Loïc Bonneval & Florence Goffette‐Nagot & Zhejin Zhao, 2022. "The impact of rent control: Investigations on historical data in the city of Lyon," Growth and Change, Wiley Blackwell, vol. 53(4), pages 1646-1667, December.
    5. Pedro Gete & Franco Zecchetto, 2018. "Distributional Implications of Government Guarantees in Mortgage Markets," The Review of Financial Studies, Society for Financial Studies, vol. 31(3), pages 1064-1097.
    6. Murray, Cameron, 2020. "A housing supply absorption rate equation," OSF Preprints 7n8rj, Center for Open Science.
    7. Dan Andrews, 2010. "Real House Prices in OECD Countries: The Role of Demand Shocks and Structural and Policy Factors," OECD Economics Department Working Papers 831, OECD Publishing.
    8. Rebecca Diamond & Tim McQuade & Franklin Qian, 2019. "The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco," American Economic Review, American Economic Association, vol. 109(9), pages 3365-3394, September.
    9. Christian A. L. Hilber, 2019. "Immobilienpreise und Immobilienzyklen und die Rolle von Angebotsbeschränkungen [The impact of local supply constraints on house prices and price dynamics]," Zeitschrift für Immobilienökonomie (German Journal of Real Estate Research), Springer;Gesellschaft für Immobilienwirtschaftliche Forschung e. V., vol. 5(1), pages 37-65, November.
    10. Andrii Parkhomenko, 2018. "The Rise of Housing Supply Regulation in the US: Local Causes and Aggregate Implications," 2018 Meeting Papers 275, Society for Economic Dynamics.
    11. Monras, Joan, 2015. "Economic Shocks and Internal Migration," IZA Discussion Papers 8840, Institute of Labor Economics (IZA).
    12. Waxman, Andrew & Liang, Yuanning & Li, Shanjun & Barwick, Panle Jia & Zhao, Meng, 2020. "Tightening belts to buy a home: Consumption responses to rising housing prices in urban China," Journal of Urban Economics, Elsevier, vol. 115(C).
    13. Abe C. Dunn & Mahsa Gholizadeh, 2020. "The Geography of Consumption and Local Economic Shocks: The Case of the Great Recession," BEA Working Papers 0179, Bureau of Economic Analysis.
    14. Ernest Liu & Aleh Tsyvinski, 2021. "Dynamical Structure and Spectral Properties of Input-Output Networks," Working Papers 2021-13, Princeton University. Economics Department..
    15. Michael J Böhm & Terry Gregory & Pamela Qendrai & Christian Siegel, 2021. "Demographic change and regional labour markets," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 37(1), pages 113-131.
    16. John I. Carruthers & Gordon F. Mulligan, 2013. "Through the Crisis," Economic Development Quarterly, , vol. 27(2), pages 124-143, May.
    17. Murray, Cameron & Limb, Mark, 2020. "We zoned for density and got higher house prices: Supply and price effects of upzoning over 20 years," OSF Preprints zkt7v, Center for Open Science.
    18. Ji, Yongjie & Rabotyagov, Sergey & Kling, Catherine L., 2014. "Crop Choice and Rotational Effects: A Dynamic Model of Land Use in Iowa in Recent Years," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170366, Agricultural and Applied Economics Association.
    19. David López-Rodríguez & María de los Llanos Matea, 2019. "Recent developments in the rental housing market in Spain," Economic Bulletin, Banco de España, issue SEP.
    20. Henrik Yde Andersen & Søren Leth-Petersen, 2021. "Housing Wealth or Collateral: How Home Value Shocks Drive Home Equity Extraction and Spending," Journal of the European Economic Association, European Economic Association, vol. 19(1), pages 403-440.

    More about this item

    Keywords

    Housing supply; House price dynamics; Residential investment;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

    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:fip:fedgfe:2024-10. 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: Ryan Wolfslayer ; Keisha Fournillier (email available below). General contact details of provider: https://edirc.repec.org/data/frbgvus.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.