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Supply Restrictions, Subprime Lending and Regional US Housing Prices

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  • Anundsen, André Kallåk

    (Dept. of Economics, University of Oslo)

  • Heebøll, Christian

    (Department of Economics, University of Copenhagen)

Abstract

This paper analyzes the recent boom-bust cycle in the US housing market from a regional perspective. Particular attention is paid to supply side restrictions and financial accelerator effects related to subprime lending. Considering 248 Metropolitan Statistical Areas across the entire US, we estimate a simultaneous boom-bust system for housing prices and supply. The model includes non-linear regional specific supply elasticities, determined by geographical and regulatory supply restrictions. In contrast to the predictions of a supply-demand framework, our results suggest that tighter supply restrictions lead to both a larger housing price boom and bust following a temporary increase in subprime lending. Extending the model to include a financial accelerator, our results indicate that supply restricted areas are significantly more exposed to this mechanism, which explains the greater housing price volatility in these areas over the course of a boom-bust cycle.

Suggested Citation

  • Anundsen, André Kallåk & Heebøll, Christian, 2013. "Supply Restrictions, Subprime Lending and Regional US Housing Prices," Memorandum 04/2013, Oslo University, Department of Economics.
    • Handle: RePEc:hhs:osloec:2013_004
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    File URL: https://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2013/memo-04-2013.pdf
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    References listed on IDEAS

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    Cited by:

    1. Heike Joebges & Sebastian Dullien & Alejandro Márquez-Velázquez, 2015. "What causes housing bubbles?," IMK Studies 43-2015, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    2. Heike Joebges & Sebastian Dullien & Alejandro Márquez-Velázquez, 2015. "What causes housing bubbles? A theoretical and empirical inquiry," Competence Centre on Money, Trade, Finance and Development 1501, Hochschule fuer Technik und Wirtschaft, Berlin.
    3. repec:bny:wpaper:0056 is not listed on IDEAS
    4. 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.

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    More about this item

    Keywords

    Regional Boom-Bust Cycles; Housing Supply Restrictions; Subprime Lending; Financial Accelerator;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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