Land Development and Frictions to Housing Supply Over the Business Cycle

41 Pages Posted: 27 Feb 2024

See all articles by Hyunseung Oh

Hyunseung Oh

Board of Governors of the Federal Reserve System

Choongryul Yang

Board of Governors of the Federal Reserve System

Chamna Yoon

Seoul National University

Date Written: February, 2024

Abstract

Using a novel data set of U.S. residential land developments, we document that the average time to develop residential properties-which includes both the time spent preparing land infrastructures and construction-is about three years, consistent with sizable lags in housing investment projects. We show that the time to develop is highly dispersed across locations, a finding that helps quantify the housing supply elasticity that is relevant for assessing local housing variations over the business cycle. We also show that incorporating long and dispersed time to develop into an otherwise standard housing investment model helps rationalize some empirical facts on the housing market. Our model implies that policies to boost housing supply are less effective in immediately stabilizing house prices for regions where land development takes a long time.

Keywords: Housing supply, House price dynamics, Residential investment

JEL Classification: E22, E32, R31

Suggested Citation

Oh, Hyunseung and Yang, Choongryul and Yoon, Chamna, Land Development and Frictions to Housing Supply Over the Business Cycle (February, 2024). FEDS Working Paper No. 2024-10, Available at SSRN: https://ssrn.com/abstract=4737326 or http://dx.doi.org/10.17016/FEDS.2024.010

Hyunseung Oh (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Choongryul Yang

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Chamna Yoon

Seoul National University ( email )

Kwanak-gu
Seoul, 151-742
Korea, Republic of (South Korea)

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