Housing dynamics: An urban approach

Edward L. Glaeser; Joseph Gyourko; Eduardo Morales; Charles G. Nathanson

doi:10.1016/j.jue.2014.02.003

Housing dynamics: An urban approach

Edward L. Glaeser, Joseph Gyourko, Eduardo Morales, Charles G. Nathanson^*

^*Corresponding author for this work

Finance

Research output: Contribution to journal › Article › peer-review

86 Scopus citations

Abstract

A dynamic linear rational equilibrium model in the tradition of Alonso, Rosen and Roback is consistent with many outstanding stylized facts of housing markets. These include: (a) that the markets are local in nature; (b) that construction persistence is fully compatible with mean reversion in prices; and (c) that price changes are predictable. Calibration exercises to match moments of the real data have notable successes and failures. The volatility in local income processes as reflected in HMDA mortgage applicant data can account for much of the observed price and construction volatility, except for the most inelastically supplied local markets. The model's biggest failure lies in its inability to match the strong persistence in high frequency price changes from year to year.

Original language	English (US)
Pages (from-to)	45-56
Number of pages	12
Journal	Journal of Urban Economics
Volume	81
DOIs	https://doi.org/10.1016/j.jue.2014.02.003
State	Published - May 2014

Funding

Glaeser thanks the Taubman Center for State and Local Government at Harvard University, Gyourko thanks the Research Sponsors Program of the Zell/Lurie Real Estate Center at The Wharton School, University of Pennsylvania, and Nathanson thanks the NSF Graduate Research Fellowship Program for financial support. We appreciate the comments of seminar participants at the University of California-Berkeley, the University of Chicago, MIT, the NBER Summer Institute, and the Federal Home Loan Mortgage Corporation on previous versions of the paper. Graham Elliot and James Stock provided helpful guidance. Jiashuo Feng, Andy Moore, and Jon Steinsson provided superb research assistance.

Keywords

Housing demand
Housing supply
Method of moments

ASJC Scopus subject areas

Economics and Econometrics
Urban Studies

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

Access to Document

10.1016/j.jue.2014.02.003

Cite this

@article{d674a88dfe614926979a9436f555fa8f,

title = "Housing dynamics: An urban approach",

abstract = "A dynamic linear rational equilibrium model in the tradition of Alonso, Rosen and Roback is consistent with many outstanding stylized facts of housing markets. These include: (a) that the markets are local in nature; (b) that construction persistence is fully compatible with mean reversion in prices; and (c) that price changes are predictable. Calibration exercises to match moments of the real data have notable successes and failures. The volatility in local income processes as reflected in HMDA mortgage applicant data can account for much of the observed price and construction volatility, except for the most inelastically supplied local markets. The model's biggest failure lies in its inability to match the strong persistence in high frequency price changes from year to year.",

keywords = "Housing demand, Housing supply, Method of moments",

author = "Glaeser, {Edward L.} and Joseph Gyourko and Eduardo Morales and Nathanson, {Charles G.}",

note = "Funding Information: Glaeser thanks the Taubman Center for State and Local Government at Harvard University, Gyourko thanks the Research Sponsors Program of the Zell/Lurie Real Estate Center at The Wharton School, University of Pennsylvania, and Nathanson thanks the NSF Graduate Research Fellowship Program for financial support. We appreciate the comments of seminar participants at the University of California-Berkeley, the University of Chicago, MIT, the NBER Summer Institute, and the Federal Home Loan Mortgage Corporation on previous versions of the paper. Graham Elliot and James Stock provided helpful guidance. Jiashuo Feng, Andy Moore, and Jon Steinsson provided superb research assistance. Copyright: Copyright 2014 Elsevier B.V., All rights reserved.",

year = "2014",

month = may,

doi = "10.1016/j.jue.2014.02.003",

language = "English (US)",

volume = "81",

pages = "45--56",

journal = "Journal of Urban Economics",

issn = "0094-1190",

publisher = "Academic Press Inc.",

}

TY - JOUR

T1 - Housing dynamics

T2 - An urban approach

AU - Glaeser, Edward L.

AU - Gyourko, Joseph

AU - Morales, Eduardo

AU - Nathanson, Charles G.

N1 - Funding Information: Glaeser thanks the Taubman Center for State and Local Government at Harvard University, Gyourko thanks the Research Sponsors Program of the Zell/Lurie Real Estate Center at The Wharton School, University of Pennsylvania, and Nathanson thanks the NSF Graduate Research Fellowship Program for financial support. We appreciate the comments of seminar participants at the University of California-Berkeley, the University of Chicago, MIT, the NBER Summer Institute, and the Federal Home Loan Mortgage Corporation on previous versions of the paper. Graham Elliot and James Stock provided helpful guidance. Jiashuo Feng, Andy Moore, and Jon Steinsson provided superb research assistance. Copyright: Copyright 2014 Elsevier B.V., All rights reserved.

PY - 2014/5

Y1 - 2014/5

N2 - A dynamic linear rational equilibrium model in the tradition of Alonso, Rosen and Roback is consistent with many outstanding stylized facts of housing markets. These include: (a) that the markets are local in nature; (b) that construction persistence is fully compatible with mean reversion in prices; and (c) that price changes are predictable. Calibration exercises to match moments of the real data have notable successes and failures. The volatility in local income processes as reflected in HMDA mortgage applicant data can account for much of the observed price and construction volatility, except for the most inelastically supplied local markets. The model's biggest failure lies in its inability to match the strong persistence in high frequency price changes from year to year.

AB - A dynamic linear rational equilibrium model in the tradition of Alonso, Rosen and Roback is consistent with many outstanding stylized facts of housing markets. These include: (a) that the markets are local in nature; (b) that construction persistence is fully compatible with mean reversion in prices; and (c) that price changes are predictable. Calibration exercises to match moments of the real data have notable successes and failures. The volatility in local income processes as reflected in HMDA mortgage applicant data can account for much of the observed price and construction volatility, except for the most inelastically supplied local markets. The model's biggest failure lies in its inability to match the strong persistence in high frequency price changes from year to year.

KW - Housing demand

KW - Housing supply

KW - Method of moments

UR - http://www.scopus.com/inward/record.url?scp=84897902747&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84897902747&partnerID=8YFLogxK

U2 - 10.1016/j.jue.2014.02.003

DO - 10.1016/j.jue.2014.02.003

M3 - Article

AN - SCOPUS:84897902747

SN - 0094-1190

VL - 81

SP - 45

EP - 56

JO - Journal of Urban Economics

JF - Journal of Urban Economics

ER -

Housing dynamics: An urban approach

Abstract

Funding

Keywords

ASJC Scopus subject areas

UN SDGs

Access to Document

Other files and links

Fingerprint

Cite this