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Fundamental and Speculative Demands for Housing
Author:
Weicheng Lian null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2019: Issue 063
Language:
English
Publication Date:
19 Mar 2019
DOI:
https://doi.org/10.5089/9781498302722.001
ISBN:
9781498302722
ISSN:
1018-5941
Pages:
54
Keywords:
WP; production function; Asset Bubbles; Belief; Housing Cycles; Land Prices; Land Share; housing demand shocks; structure price; housing service; services production function; consumption goods; house price trend; price change; Housing; Housing prices; Price structures; Consumption
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper separates the roles of demand for housing services and belief about future house prices in a house price cycle, by utilizing a feature of user-cost-of-housing that it is sensitive to demand for housing services only. Optimality conditions of producing housing services determine user-cost-of-housing and the elasticity of substitution between land and structures in producing housing services. I find that the impact of demand for housing services on house prices is amplified by a small elasticity of substitution, and demand explained four fifths of the U.S. house price boom in the 2000s.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund