Housing dynamics: An urban approach

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

Research output: Contribution to journalArticlepeer-review

83 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 languageEnglish (US)
Pages (from-to)45-56
Number of pages12
JournalJournal of Urban Economics
Volume81
DOIs
StatePublished - May 2014

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics
  • Urban Studies

Keywords

  • Housing demand
  • Housing supply
  • Method of moments

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