Mastering the metropolis through research and thought leadership.
Working Papers

Global Capital and Local Assets: House Prices, Quantitites, and Elasticities

Working paper #833
Caitlin Gorback and Benjamin J. Keys

Abstract
Interconnected capital markets allow mobile global capital to flow into immobile local assets. This paper exploits foreign demand shocks to the U.S. housing market to estimate local price elasticities of supply. Other countries introduced foreign-buyer taxes beginning in 2011, intended to deter foreign housing investment. We show house prices grew 6 to 9 percentage points more in U.S. zipcodes with high foreign-born populations after 2011, subsequently reversing with the cooling of global-U.S. relations post-2017. We use these international tax policy changes as a U.S. housing demand
shock and estimate local house price and quantity elasticities with respect to international capital. The ratio of these two elasticities yields a new estimate of the local house price elasticity of supply, which we construct for 100 large U.S. cities. These supply elasticities average 0.26 and vary between 0.06 and 0.9, suggesting that local housing markets are currently inelastic and exhibit substantial spatial heterogeneity.

Download full paper · 3MB PDF


In This Section
Explore Topics

1010 Affordable Housing Amazon Amenitization Architecture Artificial Intelligence Asia Australia automation Autonomous Vehicles bonds Borrowing Constraints Brexit California Canada Capital Business China Co-Working Environment coastal markets cold storage Colombia Commercial Brokerage Commercial Real Estate commissions Congestion consumer bias covid-19 CRE credit card market Credit Default Swaps Credit Insurance Credit Risk Transfers Culture Data Analytics data centers Data Collection Technology Debt Market Demand Demographics Density Development Discrete Choice disruption Diversity drones e-Commerce Economic Corridors economic policy economics education election studies Equity Funds Equity Market Ethnic Factors Europe Fannie Mae financial asset management Foreclosures Foreign Policy France Freddie Mac general equilibrium Global global economy Global Financial Crisis Globalization great depression Great Recession healthy buildings Hedonic hospitality Housing & Residential housing boom Housing Disease housing prices Housing Supply Identity Income Inequality India inflation Inter-generational mobility interest rates Investing jobs labor market Lagging Regions land use regulation Language life sciences Macroeconomics malls Market Pricing megacities Microeconomics Migration Minimum Payments Mixed-Use Mobility moral hazard mortgage insurance mortgage market Mortgage Rates Mortgages Multi-family Nation Building Non-Traditional Mortgages Office Market office sector pension funds Placed Based Policies Political Risk Price Discovery Private Equity Business public health public policy Public Schools real estate brokerage Real Estate Investment Real Estate Investment Trusts Recession Rental Retail Retirement reverse mortgages Risk Adjustment risk management risk-shifting robotics single family housing Slums Sorting South America Spatial Regions spillover effect stimulus package Sub-Prime Mortgages Sustainability Technology telecommunications trade transportation unemployment United States Urban Urbanization Warehouse welfare work from home

arrow_drop_up