Like many other assets, housing prices are quite volatile relative to observable changes in fundamentals. If we are going to understand boom-bust housing cycles, we must incorporate housing supply. In this paper, we present a simple model of housing bubbles which predicts that places with more...

The key stylized facts of the housing market are positive serial correlation of price changes at one year frequencies and mean reversion over longer periods, strong persistence in construction, and highly volatile prices and construction levels within markets over time. We calibrate a dynamic...

Urban economists understand housing prices with a spatial equilibrium approach that assumes people must be indifferent across locations. Since the spatial no arbitrage condition is inherently imprecise, other economists have turned to different no arbitrage conditions, such as the prediction...