As we can see the factors impacting the housing market, particularly house price, are always analysed from the long run and short run, even some researchers analysis those factors from cyclical and structural approach. How can we understand the long run and short run? And what are cyclical and structural influences on house price? Thank you.

  • $\begingroup$ Short run and long run are standard concepts in microeconomics (see en.wikipedia.org/wiki/Long_run_and_short_run). Are you asking how they might apply to the specific case of housing? $\endgroup$ – Adam Bailey Apr 19 '16 at 9:00
  • $\begingroup$ yes, I am still not sure how long run and short run factors affect house prices. $\endgroup$ – Nancy Apr 19 '16 at 15:16

Housing markets are complex and the following are just some basic points.

Key features of houses as economic goods are: 1) their very long life; 2) their differentiation by type and location. In the short run housing supply (the total existing stock, plus any new houses completed) is price-inelastic because the number of new houses can be only a tiny proportion of the existing stock. Hence a short-run analysis of house price changes will focus primarily on short-term changes affecting demand (eg changes in interest rates or in housing-related taxes). In a long run analysis, however, consideration also needs to be given to changes in supply, and to long-term changes affecting demand (eg population growth, rising incomes).

Cyclical factors are those that tend to reverse over a period of a few years. The cause of a cycle in a housing market could be internal to that market, eg a self-fulfilling expectation at one time that prices will rise, leading to a price bubble and eventual collapse, as described here. The cause could also lie in the wider economy, eg house prices tending to rise when the economy is booming and fall in a recession. Structural factors are permanent or at least long-lived, eg land availability and planning constraints, housing-related policies that are considered unlikely to change, and the distribution of the existing stock between types and locations.

| improve this answer | |

Not the answer you're looking for? Browse other questions tagged or ask your own question.