Changing supply elasticities and regional housing booms

Staff working papers set out research in progress by our staff, with the aim of encouraging comments and debate.
Published on 03 January 2020

Staff Working Paper No. 844

By Knut Are Aastveit, Bruno Albuquerque and André Anundsen

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.

PDFChanging supply elasticities and regional housing booms

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