Edward Glaeser testified in Congress recently about America’s soaring housing prices.
I am an economist who has spent much of the last quarter-century studying what has gone wrong with America’s housing markets.
Initially, I worried mainly about the high costs and limited housing supply in coastal America, because I watched as the inflation-adjusted cost of housing in greater Boston tripled between 1980 and 2006.
But until the past decade, the cost of housing in cities like Atlanta, Dallas and Houston remained affordable – largely because these sunbelt cities built a lot of homes.
That has changed. Between the end of 2009 and the end of 2024, the real price of housing doubled in Phoenix and rose by 55 percent in Atlanta. According to the National Association of Realtors, the median new home price in now $635,000 in Miami, $476,000 in Phoenix and $450,000 in Charleston, South Carolina.
How do I know that this is about housing supply rather than housing demand?
The critical fact about America’s current housing crisis is that it is driven by a lack of supply of new homes. We live in a land of plenty and yet we have manufactured a shortage of basic living space.
Economists sort out supply and demand by looking at prices and quantities.
If prices are up and building is up, then demand has driven up prices.
If prices are up and building is down, then the explanation for high prices is limited supply.
… [H]ome building across the US collapsed after the global financial crisis, and it has yet to recover. We are producing fewer single-family homes at the start of 2025 than we did at the start of 2021, and 38 percent less than we did twenty years ago. …
… [P]laces in America that are expensive don’t build a lot and places that build a lot aren’t expensive. There is demand for homes in California and in Texas, but Texas builds much more and it remains more affordable.
