Stylized Facts about the Housing Cycle Econ 332 Spring 2010 © copyright 2010 by Casey B. Mulligan 1

Basic Facts About the Housing Cycle: Housing Sector Housing expenditure share was pretty constant, so far Rental rates were high, and still are operating surplus rates were low, and still are occupancy rates were low, and still are purchase prices rose more than rents sources disagree about the amount challenge of separating housing price from quantity housing construction boomed, both tenant and o-o Rates of return probably above normal short term interest rates were low, but not long term 2

Tenant-landlord Hypothetical

Basic Facts About the Housing Cycle: Non-Housing Sector Less construction of non-residential structures Less investment abroad Non-housing consumption was high 15

Housing Construction & the Current Account, 1994-2006 Source: Gete (2008) 16