The Housing Cycle and Prospects for Technical Progress
Information technology has already transformed some areas of our lives, and has the prospect for transforming other sectors. This paper is about economic behaviors that anticipate technical progress, and how they may describe the housing price and construction boom of 2000-2006 and the bust thereafter. Specifically, I note that only a minority of housing output remains as an operating surplus for the structures' owners. It follows the prospect of productivity shocks to the mortgage and real estate industries have the potential to both move housing prices and non-residential consumption in the same direction, and that demand impulses are magnified in their effects on housing prices. A bust occurs when those impulses are realized later, or in a lesser magnitude, than originally anticipated. This view has testable implications for vacancy rates, net operating surplus, aggregate consumption patterns, net investment rates, and non-residential construction - all of which confirm the theory.
|Date of creation:||May 2010|
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- Buiter, Willem H., 2010.
"Housing wealth isn't wealth,"
Economics - The Open-Access, Open-Assessment E-Journal,
Kiel Institute for the World Economy (IfW), vol. 4, pages 1-29.
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- Buiter, Willem H., 2009. "Housing wealth isn't wealth," Economics Discussion Papers 2009-56, Kiel Institute for the World Economy (IfW).
- Willem H. Buiter, 2008. "Housing Wealth Isn't Wealth," NBER Working Papers 14204, National Bureau of Economic Research, Inc.
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- Casey Mulligan & Luke Threinen, 2008. "Market Responses to the Panic of 2008," NBER Working Papers 14446, National Bureau of Economic Research, Inc. Full references (including those not matched with items on IDEAS)
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