Trickle-Down Housing Economics

I develop a novel methodology to measure changes in house prices and housing stocks within quality submarkets in a metropolitan area. Applying this methodology to 2000--2019, I find evidence for ``trickle-down housing economics'': metropolitan areas that lack construction of high-quality housing experience particularly strong growth in low-quality house prices due to equilibrium effects. I then fit a housing assignment model to data from Los Angeles that generates this joint pattern of house prices and housing stock growth across quality submarkets. According to the model, high-quality construction diminishes low-quality house prices, but cross-metro migration attenuates much of this effect. As a result, low-quality construction decreases low-quality house prices substantially more.