Supply Restrictions, Subprime Lending and Regional US Housing Prices
This paper analyzes the recent boom-bust cycle in the US housing market from a regional perspective. Particular attention is paid to supply side restrictions and financial accelerator effects related to subprime lending. Considering 248 Metropolitan Statistical Areas across the entire US, we estimate a simultaneous boom-bust system for housing prices and supply. The model includes non-linear regional specific supply elasticities, determined by geographical and regulatory supply restrictions. In contrast to the predictions of a supply-demand framework, our results suggest that tighter supply restrictions lead to both a larger housing price boom and bust following a temporary increase in subprime lending. Extending the model to include a financial accelerator, our results indicate that supply restricted areas are significantly more exposed to this mechanism, which explains the greater housing price volatility in these areas over the course of a boom-bust cycle.
|Date of creation:||25 Jan 2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 22 85 51 27
Fax: 22 85 50 35
Web page: http://www.oekonomi.uio.no/indexe.html
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Haifang Huang & Yao Tang, 2011. "Dropping the Geographic-Constraints Variable Makes Only a Minor Difference: Reply to Cox," Econ Journal Watch, Econ Journal Watch, vol. 8(1), pages 28-32, January.
- Cohen, Jeffrey P. & Coughlin, Cletus C. & Lopez, David A., 2012. "The boom and bust of U.S. housing prices from various geographic perspectives," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 341-368.
- LaCour-Little, Michael & Calhoun, Charles A. & Yu, Wei, 2011. "What role did piggyback lending play in the housing bubble and mortgage collapse?," Journal of Housing Economics, Elsevier, vol. 20(2), pages 81-100, June.
- Nobuhiro Kiyotaki & John Moore, 1995.
NBER Working Papers
5083, National Bureau of Economic Research, Inc.
- Glaeser, Edward L. & Gyourko, Joseph & Saiz, Albert, 2008.
"Housing supply and housing bubbles,"
Journal of Urban Economics,
Elsevier, vol. 64(2), pages 198-217, September.
- Glaeser, Edward & Saiz, Albert & Gyourko, Joseph, 2008. "Housing Supply and Housing Bubbles," Scholarly Articles 2962640, Harvard University Department of Economics.
- Edward L. Glaeser & Joseph Gyourko & Albert Saiz, 2008. "Housing Supply and Housing Bubbles," NBER Working Papers 14193, National Bureau of Economic Research, Inc.
- Aoki, Kosuke & James Proudman & Gertjan Vlieghe, 2003.
"House prices, consumption, and monetary policy: a financial accelerator approach,"
Royal Economic Society Annual Conference 2003
7, Royal Economic Society.
- Aoki, Kosuke & Proudman, James & Vlieghe, Gertjan, 2004. "House prices, consumption, and monetary policy: a financial accelerator approach," Journal of Financial Intermediation, Elsevier, vol. 13(4), pages 414-435, October.
- Kosuke Aoki & James Proudman & Gertjan Vlieghe, 2002. "House prices, consumption, and monetary policy: a financial accelerator approach," Bank of England working papers 169, Bank of England.
- Matteo Iacoviello, 2005.
"House Prices, Borrowing Constraints, and Monetary Policy in the Business Cycle,"
American Economic Review,
American Economic Association, vol. 95(3), pages 739-764, June.
- Matteo Iacoviello, 2002. "House prices, borrowing constraints and monetary policy in the business cycle," Boston College Working Papers in Economics 542, Boston College Department of Economics, revised 06 Dec 2004.
- Robert B. Avery & Kenneth P. Brevoort & Glenn B. Canner, 2007. "Opportunities and Issues in Using HMDA Data," Journal of Real Estate Research, American Real Estate Society, vol. 29(4), pages 351-380.
- Huang, Haifang & Tang, Yao, 2010.
"Residential Land Use Regulation and the US Housing Price Cycle Between 2000 and 2009,"
2010-11, University of Alberta, Department of Economics, revised 01 Nov 2010.
- Huang, Haifang & Tang, Yao, 2012. "Residential land use regulation and the US housing price cycle between 2000 and 2009," Journal of Urban Economics, Elsevier, vol. 71(1), pages 93-99.
- Fernando Ferreira & Joseph Gyourko & Joseph Tracy, 2008.
"Housing Busts and Household Mobility,"
NBER Working Papers
14310, National Bureau of Economic Research, Inc.
- Coleman IV, Major & LaCour-Little, Michael & Vandell, Kerry D., 2008. "Subprime lending and the housing bubble: Tail wags dog?," Journal of Housing Economics, Elsevier, vol. 17(4), pages 272-290, December.
- repec:tpr:qjecon:v:125:y:2010:i:3:p:1253-1296 is not listed on IDEAS
- Meen, Geoffrey P, 1990. "The Removal of Mortgage Market Constraints and the Implications for Econometric Modelling of UK House Prices," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(1), pages 1-23, February.
- repec:tpr:qjecon:v:124:y:2009:i:4:p:1449-1496 is not listed on IDEAS
- Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
- Wendell Cox, 2011. "Constraints on Housing Supply: Natural and Regulatory," Econ Journal Watch, Econ Journal Watch, vol. 8(1), pages 13-27, January.
When requesting a correction, please mention this item's handle: RePEc:hhs:osloec:2013_004. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rhiana Bergh-Seeley)
If references are entirely missing, you can add them using this form.