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The Housing Cycle and Prospects for Technical Progress

  • Casey B. Mulligan

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.

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File URL: http://www.nber.org/papers/w15971.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15971.

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Date of creation: May 2010
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Handle: RePEc:nbr:nberwo:15971
Note: EFG PE
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  1. Buiter, Willem H., 2009. "Housing wealth isn't wealth," Economics Discussion Papers 2009-56, Kiel Institute for the World Economy.
  2. Casey Mulligan & Luke Threinen, 2008. "Market Responses to the Panic of 2008," NBER Working Papers 14446, National Bureau of Economic Research, Inc.
  3. Casey B. Mulligan & Luke Threinen, 2010. "The Marginal Products of Residential and Non-Residential Capital Through 2009," NBER Working Papers 15897, National Bureau of Economic Research, Inc.
  4. Casey B. Mulligan & Xavier Sala-i-Martin, 1991. "A Note on the Time-Elimination Method For Solving Recursive Dynamic Economic Models," NBER Technical Working Papers 0116, National Bureau of Economic Research, Inc.
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