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The truth about the US housing market

By Leith van Onselen - posted Friday, 7 January 2011

To illustrate this point, first consider the below chart, which plots the CPI-adjusted house price performance of the cities included in the 20-city Case Shiller Composite index and deemed by Demographia as having "more prescriptive land regulations".

As you can see, prices have been highly volatile, with all cities experiencing wild boom/bust conditions.

Now consider prices in the cities within the 20-city Case-Shiller Composite Index with "more responsive land regulations".

As you can see, real house prices have remained relatively stable in the supply responsive cities.

The situation is similar at the state level using FHFA housing data. First, consider the states with "more prescriptive land regulations":

Now consider states with "more responsive land regulations":

Continued over the page...

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This article was first published on The Unconventional Economist on January 4, 2011.

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About the Author

An Australian currently working for a leading investment bank. I have previously worked as an Economist at the Australian Treasury and a Senior Economist at the Victorian Treasury.