---
title: "The Housing Boom and Bust: Model Meets Evidence"
authors: "Greg Kaplan; Kurt Mitman; Giovanni Violante"
source: "Journal of Political Economy"
source_url: "https://www.nber.org/papers/w23694"
paper_id: "JPE 128(9):3285-3345 (2020); NBER WP 23694"
harvested: 2026-08-22
year: 2020
keywords: [housing, stock-flow, quantitative model, boom-bust, general equilibrium]
---

## Abstract

Greg Kaplan, Kurt Mitman, and Giovanni Violante build a quantitative general-equilibrium model
of the housing market to see whether it can account for the 2006-2012 US housing boom and bust.
The model features a **stock-flow structure of housing**: a stock of houses (quantity) valued at a
price, with a flow of new construction / existing transactions, forward-looking homeowners, and
borrowing constraints tied to house values. They show how a modest, plausibly-sized credit or
demand shock, propagated through the home-equity-driven refinancing / consumption channel,
produces the observed co-movement of house prices, quantities (starts), and household debt —
"model meets evidence" in the sense of matching several empirical facts simultaneously.

**Relevance to StratMac RE-sector work (and Mike's circuit vocabulary):** "Housing Is the
Business Cycle"-style stock-flow modeling is the micro-founded anchor for the proposed
**inventory = capacitor / supply-constraint = resistor / delay = first-class element** circuit
vocabulary in `re-sector-literature-and-methods.md` §3.8. Kaplan-Mitman-Violante is the
peer-reviewed stock-flow reference that a state-space or circuit-style Tier-2 RE model can be
set against — the battery of facts it matches (price-quantity co-movement, debt cycle, turnover)
is the validation target for any quantity-level approach.

*Peer-reviewed JPE; NBER WP 23694 is the free working-paper version.*