Housing Supply, Land Costs and Price Adjustment

We analyze relationships between housing supply elasticities, land costs and house price dynamics, contributing three main insights.

• First, higher housing supply elasticities help contain short-run price spikes following demand shocks.
• Second, land price dynamics influence this relationship; supply responses are lessened and house price spikes are exacerbated as land prices increase.
• Third, we estimate a system of regional equations modeling housing supply using a Tobin's specification (incorporating construction and land costs) and show that regional price dynamics are a function of the region's supply elasticity.

CAUTION: You may need to pay or buy a subscription to read the full article

Citation

Grimes, Arthur and Andrew Aitken. 2010. "Housing Supply, Land Costs and Price Adjustment", Real Estate Economics 38:2, pp. 325-53.