The baby boom, the baby bust, and the housing market_A second look教程.pdfVIP

Regional Science and Urban Economics 21 (1991) 547-552. North-Holland The baby boom, the baby bust, and the housing market A second look Bruce W. Hamilton Johns Hopkins University, Baltimore, MD 21218, USA Final version received June 1990 I re-examine Mankiw-Weil’s (MW) claim that house prices will fall 47% by 2007. MW argue that the arrival of the Baby Boom generation at adulthood drove up prices during the 1970s. When the beginnings of the Baby Bust generation matured in the 198Os,prices softened. When this generation arrives in earnest, prices will collapse. I make three points: (1) The regression upon which MW hang their prediction has an implausible -8.1% trend, which drives their prediction. (2) Demand directly influences the rental price; the asset price (MW’s variable) is influenced by demand only indirectly. I re-run MW’s regression, replacing the asset price with the rental price, and their prediction disappears. (3) Relying on data presented by MW, I show that housing consumption rose during the 197Os,after adjusting for income growth. Just when MW say the asset price of housing was rising, consumers behaved as if the price were falling. Consumers were right: The rental price fell by approximately 20”/, during the 1970s. 1. Introduction In a paper which understandably received widespread attention, Mankiw and Weil (1989) (hereafter MW) predicted that house values would fall by 47% over the next twenty years. A sketch of.their argument is this: Housing demand is driven by young adults (actually by a weighted sum of the entire population, with young adults receiving the highest weight).