Do you know of any empirical analysis or modelling that tries to back out the financial component from the supply component? Seems to me both are real, though I appreciate the need for critical macro-financial arguments like yours to push back against simplistic and motivated supply-side reasoning.
Yes, I did my doctorate on this very topic, using - as Ann asks - a macro-economic perspective. Very high levels of construction during the bubble years put significant downward pressure on housing prices, offset by excess credit. Note, for example, the downward trend in rents in Ireland 2000-2005 compared to the trend in prices.
While Ann and I agree that credit supply pushes up the capital value of housing, we seem to disagree on housing supply. Here, I take my view from the scientific literature, which is unambiguous on this: availability determines affordability.
Hi Ann,
Do you know of any empirical analysis or modelling that tries to back out the financial component from the supply component? Seems to me both are real, though I appreciate the need for critical macro-financial arguments like yours to push back against simplistic and motivated supply-side reasoning.
Yes, I did my doctorate on this very topic, using - as Ann asks - a macro-economic perspective. Very high levels of construction during the bubble years put significant downward pressure on housing prices, offset by excess credit. Note, for example, the downward trend in rents in Ireland 2000-2005 compared to the trend in prices.
While Ann and I agree that credit supply pushes up the capital value of housing, we seem to disagree on housing supply. Here, I take my view from the scientific literature, which is unambiguous on this: availability determines affordability.