Document Type

Article

Publication Date

3-2020

Journal Title or Book Title

Journal of Business & Economic Policy

Volume

7

Issue

1

Version

Publisher's PDF

Publisher's Statement

Copyrights for articles published in JBEP are retained by the authors, with first publication rights granted to the journal. The journal/publisher is not responsible for subsequent uses of the work. It is the author's responsibility to bring an infringement action if so desired by the author

DOI

10.30845/jbep.v7n1p4

Abstract

Home prices have soared by 58 percent during the past seven years and now stand 15 percent above boom-time highs. Although this steep rise is reminiscent of last decade’s housing bubble, the root cause is very different and implies a sharply divergent path for the housing market in coming years. The price rise during the housing boom was a symptom of excesses in housing. In contrast, the current price rise signals the need for more construction as the market faces growing shortages. This paper introduces a new housing supply metric to show that the massive overbuilding during the housing boom set in motion an extended period of underbuilding that is still ongoing ten years after the recession ended. The current housing underbuilding explains the recent price rise, and the new metric suggests that construction activity and prices will continue to increase.

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