Anatomy of a Market Crash: Suburban Housing Supply in California: 1989 - 1994

David Dale-Johnson

No 8652, Working Paper from USC Lusk Center for Real Estate

Abstract: Prices of existing houses peaked in southern California during the second quarter of 1990 andpreceded a lengthy recession. This paper examines the response of homebuilders in a masterplanned community in the suburban Los Angeles region to the end of the boom and the onsetand deepening of the recession. There has been little research which has focused at the microlevel on builders’ responses to changes in market conditions. This paper will employ data frommaster planned community home builders in Riverside County between 1989 and 1994 toexamine the dynamics of the market. This analysis sheds some light on the volatility of housingstarts not attributable to price changes in previous studies. For example, builders are found toshift to producing low cost or lower priced housing units presumably in response to changingconsumer preferences. This adjustment does not arise from design changes but simplyproducing more of less expensive product that had already been planned and curtailingproduction of higher priced houses.

Keywords: housing supply; home building; Housing Prices (search for similar items in EconPapers)
Date: 1999
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Persistent link: https://EconPapers.repec.org/RePEc:luk:wpaper:8652

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