Chicago Booth Review Podcast Why are home prices so high?
Oct 8, 2025
Chad Syverson, an economist from Chicago Booth specializing in housing markets, dives into the complex world of real estate pricing. He discusses how rising home costs are influenced more by land prices and permitting issues than construction costs. Historical trends show drastic price increases since the 1970s, with spikes driven by demand shifts and limited supply. Chad emphasizes the need for reforms to increase housing density and reduce legal restrictions to tackle affordability. He also contrasts coastal metro challenges with more affordable inland cities.
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Building Costs Lose Their Grip
- Building costs now explain almost none of recent house price increases.
- Other factors like land, permitting, and demand have become far more important.
Underbuilding Drives Higher Prices
- Housing supply has lagged household formation since the 1980s and 1990s.
- That chronic underbuilding pushed prices to rise faster than construction costs.
Demand Shocks Amplify Shortages
- Sudden demand spikes (looser credit, pandemic household changes) drove big price surges.
- Supply constraints then amplified those demand shocks into rapid price growth.