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Newsletter
Why Housing Has Been So Strong, but Might Not Be for Long
The current monetary policy tightening cycle has seen the fastest increases in the fed funds rate in more than 40 years. While not all tightening cycles have led to significant increases in mortgage rates (e.g., the 1988, 2016, and 2004 cycles), this time around mortgage rates have increased by close to 400 basis points (bps) in the first seven months since lift off (see figure A1 in the appendix). In this Chicago Fed Letter, we describe how this increase has shaped (and is still shaping) the dynamics of the housing sector.
Working Paper
On Commercial Construction Activity's Long and Variable Lags
We use microdata on the phases of commercial construction projects to document three facts regarding time-to-plan lags: (1) plan times are long--about 1.5 years on average--and highly variable, (2) roughly one-third of projects are abandoned in planning, (3) property price appreciation reduces the likelihood of abandonment. We construct a model with endogenous planning starts and abandonment that matches these facts. Endogenous abandonment makes short-term building supply more elastic, as price shocks immediately affect the exercise of construction options rather than just planning starts. ...
Working Paper
On Commercial Construction Activity's Long and Variable Lags
We use microdata on the phases of commercial construction projects to document three facts regarding time-to-plan lags: (1) plan times are long--about 1.5 years on average--and highly variable, (2) roughly one-third of projects are abandoned in planning, (3) property price appreciation reduces the likelihood of abandonment. We construct a model with endogenous planning starts and abandonment that matches these facts. Endogenous abandonment makes short-term building supply more elastic, as price shocks immediately affect the exercise of construction options rather than just planning starts. ...
Working Paper
On Commercial Construction Activity's Long and Variable Lags
We use microdata on the phases of commercial construction projects to document three facts regarding time-to-plan lags: (1) plan times are long--about 1.5 years on average--and highly variable, (2) roughly one-third of projects are abandoned in planning, (3) property price appreciation reduces the likelihood of abandonment. We construct a model with endogenous planning starts and abandonment that matches these facts. Endogenous abandonment makes short-term building supply more elastic, as price shocks immediately affect the exercise of construction options rather than just planning starts. ...
Working Paper
On Commercial Construction Activity's Long and Variable Lags
We use microdata on the phases of commercial construction projects to document three facts regarding time-to-plan lags: (1) plan times are long--about 1.5 years on average--and highly variable, (2) roughly one-third of projects are abandoned in planning, (3) property price appreciation reduces the likelihood of abandonment. We construct a model with endogenous planning starts and abandonment that matches these facts. Endogenous abandonment makes short-term building supply more elastic, as price shocks immediately affect the exercise of construction options rather than just planning starts. ...
Working Paper
On Commercial Construction Activity's Long and Variable Lags
We use microdata on the phases of commercial construction projects to document three facts regarding time-to-plan lags: (1) plan times are long--about 1.5 years on average--and highly variable, (2) roughly one-third of projects are abandoned in planning, (3) property price appreciation reduces the likelihood of abandonment. We construct a model with endogenous planning starts and abandonment that matches these facts. Endogenous abandonment makes short-term building supply more elastic, as price shocks immediately affect the exercise of construction options rather than just planning starts. ...
Working Paper
On Commercial Construction Activity's Long and Variable Lags
We use microdata on the phases of commercial construction projects to document three facts regarding time-to-plan lags: (1) plan times are long--about 1.5 years on average--and highly variable, (2) roughly one-third of projects are abandoned in planning, (3) property price appreciation reduces the likelihood of abandonment. We construct a model with endogenous planning starts and abandonment that matches these facts. Endogenous abandonment makes short-term building supply more elastic, as price shocks immediately affect the exercise of construction options rather than just planning starts. ...