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Housing Bubbles and Busts: The Role of Supply Elasticity

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  • Keith Ihlanfeldt
  • Tom Mayock

Abstract

Existing studies of the relationship between housing price dynamics and housing supply—which have relied upon questionable proxies for supply elasticity—have yielded highly mixed results. In this paper we provide new evidence on this relationship based on actual estimates of the price elasticity of supply for local markets in Florida. Intermarket differences in housing supply elasticity are found to explain much of the variation in housing price movements and new construction during the most recent boom-bust cycle. Additionally, we find that variance in the elasticity of housing supply can be attributed to differences in land availability and the local fiscal and regulatory environment.

Suggested Citation

  • Keith Ihlanfeldt & Tom Mayock, 2014. "Housing Bubbles and Busts: The Role of Supply Elasticity," Land Economics, University of Wisconsin Press, vol. 90(1), pages 79-99.
    • Handle: RePEc:uwp:landec:v:90:y:2014:i:1:p:79-99
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    References listed on IDEAS

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    Cited by:

    1. Wendong Zhang & Cynthia J. Nickerson, 2015. "Housing Market Bust and Farmland Values: Identifying the Changing Influence of Proximity to Urban Centers," Land Economics, University of Wisconsin Press, vol. 91(4), pages 605-626.
    2. Furth, Salim, 2019. "Housing Supply in the 2010s," Working Papers 09588, George Mason University, Mercatus Center.
    3. Bimonte, Salvatore & Stabile, Arsenio, 2015. "Local taxation and urban development. Testing for the side-effects of the Italian property tax," Ecological Economics, Elsevier, vol. 120(C), pages 100-107.
    4. Albert Solé-Ollé & Elisabet Viladecans-Marsal, 2017. "Housing booms and busts and local fiscal policy," Working Papers XREAP2017-14, Xarxa de Referència en Economia Aplicada (XREAP), revised Dec 2017.
    5. Ihlanfeldt, Keith R. & Willardsen, Kevin, 2014. "The millage rate offset and property tax revenue stability," Regional Science and Urban Economics, Elsevier, vol. 46(C), pages 167-176.
    6. Bimonte, Salvatore & Stabile, Arsenio, 2017. "Land consumption and income in Italy: a case of inverted EKC," Ecological Economics, Elsevier, vol. 131(C), pages 36-43.
    7. Du, Xuejun & Huang, Zhonghua, 2018. "Spatial and temporal effects of urban wetlands on housing prices: Evidence from Hangzhou, China," Land Use Policy, Elsevier, vol. 73(C), pages 290-298.
    8. Guillaume Chapelle & J.B. Eyméoud & C. Wolf, 2023. "Land-use regulation and housing supply elasticity: evidence from France," THEMA Working Papers 2023-08, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    9. Liu, Yishen, 2018. "Estimating the elasticity of supply of housing space rather than units," Regional Science and Urban Economics, Elsevier, vol. 68(C), pages 1-10.
    10. Jackson, Kristoffer (Kip), 2018. "Regulation, land constraints, and California’s boom and bust," Regional Science and Urban Economics, Elsevier, vol. 68(C), pages 130-147.
    11. Solé-Ollé, Albert & Viladecans-Marsal, Elisabet, 2019. "Housing booms and local spending," Journal of Urban Economics, Elsevier, vol. 113(C).
    12. Salvatore Bimonte & Arsenio Stabile, 2019. "The Effect of Growth and Corruption on Soil Sealing in Italy: A Regional Environmental Kuznets Curve Analysis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(4), pages 1497-1518, December.
    13. Lozano Navarro, Francisco-Javier, 2015. "Elasticidad precio de la oferta inmobiliaria en el Gran Santiago [Housing supply elasticity in Greater Santiago]," MPRA Paper 65012, University Library of Munich, Germany.
    14. Ihlanfeldt, Keith, 2019. "The deconcentration of minority students attending bad schools: The role of housing affordability within school attendance zones containing good schools," Journal of Housing Economics, Elsevier, vol. 43(C), pages 83-101.
    15. Furth, Salim & Gonzalez, Olivia, 2019. "California Zoning: Housing Construction and a New Ranking of Local Land Use Regulation," Annals of Computational Economics, George Mason University, Mercatus Center, August.
    16. Shengguo Li & Jiaqi Liu & Jichang Dong & Xuerong Li, 2021. "20 Years of Research on Real Estate Bubbles, Risk and Exuberance: A Bibliometric Analysis," Sustainability, MDPI, vol. 13(17), pages 1-24, August.
    17. Maximilian Günnewig‐Mönert & Ronan C. Lyons, 2024. "Housing prices, costs, and policy: The housing supply equation in Ireland since 1970," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 52(4), pages 1075-1102, July.

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    JEL classification:

    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns

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