Measuring Housing Market Slack

Kishor, N. Kundan (2025): Measuring Housing Market Slack.

Abstract

This paper develops a framework to estimate U.S. housing market slack-the deviation of inventory from equilibrium levels needed for stability. We measure slack as a common cyclical component of existing and new home inventories that drives house prices through a housing Phillips curve. Results show a statistically significant inverse relationship between slack and price growth, with persistent negative slack since 2010 and extreme tightness during the pandemic. A shock to the estimated housing market slack generates substantial, lasting effects on house prices and rents, with rental impacts peaking 24 months after initial shocks.

• Item Type: MPRA Paper
• Language: English
• Keywords: Housing Market Slack, Housing Phillips Curve, Natural Level of Housing Inventory, State Space Model.
• Subjects: E - Macroeconomics and Monetary Economics > E0 - General > E00 - General; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E37 - Forecasting and Simulation: Models and Applications; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R2 - Household Analysis > R21 - Housing Demand; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location > R31 - Housing Supply and Markets

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