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Housing Dynamics

Author

Listed:
  • Joseph Gyourko

    (University of Pennsylvania)

  • Eduardo Morales

    (Harvard University)

  • Charles Nathanson

    (Harvard University)

  • Edward Glaeser

    (Harvard University)

Abstract

The volatility of house prices and construction levels is high. Both exhibit strong positive serial correlations at 1-year frequencies, Prices show strong mean reversion over 5-year periods. This paper asks whether these facts can be reconciled in a dynamic housing model, where in the tradition of Rosen and Roback, prices reflect the value of access to an area's income and amenities. We calibrate a dynamic spatial equilibrium model and find that it can fit some, but not all, the key empirical features of America's housing markets. We learn as much from the model's failure as from its successes, as they point out where future research needs to focus and where a fully rational framework cannot explain the key stylized facts.

Suggested Citation

  • Joseph Gyourko & Eduardo Morales & Charles Nathanson & Edward Glaeser, 2011. "Housing Dynamics," 2011 Meeting Papers 307, Society for Economic Dynamics.
    • Handle: RePEc:red:sed011:307
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    References listed on IDEAS

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