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.
Affordable Housing Architecture Asia Borrowing Constraints Canada China Colombia Commercial Brokerage covid-19 CRE Credit Risk Transfers Debt Market Demographics Development e-Commerce Equity Market Ethnic Factors Europe Foreclosures Global Global Financial Crisis hospitality Housing & Residential Housing Supply India inflation Investing land use regulation Macroeconomics Microeconomics Mixed-Use Mobility Mortgage Rates Mortgages Multi-family Non-Traditional Mortgages office sector Political Risk Real Estate Investment Trusts Recession Rental Retail South America Sub-Prime Mortgages Sustainability United States Urban Urbanization work from home