Housing return and construction cycles

This paper presents a general equilibrium model of the residential housing mar ket. Within the model housing returns, housing construction, mortgage loan terms, and household maintenance behavior are all endogenous. These inter acting elements tie expected housing returns to expected changes in family wealth. As a result: (1) families are credit constrained; (2) mortgage loan-to value ratios can be used to forecast future housing returns; (3) developers acquire land when expected housing returns lie above the rate of interest anc then develop when housing returns lie below. Thus, their holdings and con struction decisions also forecast housing returns.