Housing Supply and Foreclosures


William Hedberg

John Krainer

2012-20 | September 1, 2012

We explore the role of foreclosure inventories in a model of housing supply. The foreclosure variable is necessary to account for the steep and sustained drop in new construction activity following the U.S. housing market bust beginning in 2006. There is modest evidence that local banking conditions play a role in determining housing starts. Even with state-level foreclosures and banking variables in the model, there is a sizeable post-2006 residual common to all states. We argue that, in addition to observable macro and local factors, housing starts in the Great Recession have been weighed down in part by aggregate uncertainty factors

Article Citation

Krainer, John, and William Hedberg. 2012. “Housing Supply and Foreclosures,” Federal Reserve Bank of San Francisco Working Paper 2012-20. Available at https://doi.org/10.24148/wp2012-20