There are millions of homes in the greater Bay Area in California. If thousands of newly minted Facebook multi-millionaires seek their dream home in the area, how will local real estate prices change? The NY Times presents a strong article. In my 2011 piece, I present evidence that liberal cities tend to issue fewer housing permits than other communities. Albert Saiz has written an important paper documenting how topography influences housing supply. Combining the insights from both of these paper, there won’t be much new housing supply in response to this demand shock so existing homes will be bid up in price. What trickle down effects will this have on the rest of the market? Bay Area foreclosures should decline and incumbent home owners will gain a windfall. Property tax revenue will soar in these counties and this should help the local public schools. There is a huge public finance literature documenting that school quality is capitalized into home prices and this second round effect will further gentrify these areas. It will be a neat event study and somebody will publish a nice paper.
Switching subjects, I gave a Levine Lecture at UC Davis yesterday. Here are my slides for my talk about the economics of climate change adaptation.