Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/210067 
Year of Publication: 
2014
Series/Report no.: 
Working Paper No. 18/2014
Publisher: 
Norges Bank, Oslo
Abstract: 
With regard to the recent US house price cycle, we analyze how the interaction between housing supply restrictions, mortgage credit constraints and a price-to-price feedback loop affects house price volatility. Considering 247 Metropolitan Statistical Areas, we estimate a simultaneous boom-bust system for house prices, housing supply and subprime lending. The model accounts for regional differences in supply elasticities that are determined by local variations in topographical and regulatory supply restrictions. Our results suggest that tighter supply restrictions lead to both a larger house price boom and bust, and that this is due to supply restricted areas being significantly more exposed to a financial accelerator effect and a price-to-price expectation mechanism. We further find that the presence of endogenous price acceleration mechanisms contribute to dilute the positive relationship between the total quantity response and the supply elasticity.
Subjects: 
regional boom-bust cycles
housing supply restrictions
subprime lending
financial accelerator
JEL: 
E32
E44
G21
Persistent Identifier of the first edition: 
ISBN: 
978-82-7553-844-2
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper
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