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Mondragon & Johannes Wieland Share X LinkedIn Email Working Paper 33576 DOI 10.3386/w33576 Issue Date March 2025 The standard view of housing markets holds that the flexibility of local housing supply-shaped by factors like geography and regulation-strongly affects the response of house prices, house quantities and population to rising housing demand. However, from 2000 to 2020, we find that higher income growth predicts the same growth in house prices, housing quantity, and population regardless of a city's estimated housing supply elasticity. We find the same pattern when we expand the sample to 1980 to 2020, use different elasticity measures, and when we instrument for local housing demand. Using a general demand-and-supply framework, we show that our findings imply that constrained housing supply is relatively unimportant in explaining differences in rising house prices among U.S. cities. These results challenge the prevailing view of local housing and labor markets and suggest that easing housing supply constraints may not yield the anticipated improvements in housing affordability. * Acknowledgements and Disclosures The views expressed here are those of the authors and do not necessarily reflect those of the Federal Reserve Bank of San Francisco or the Federal Reserve System. We would like to thank Sajid Zaidi for the provocation and Rami Najjar for the excellent research assistance. We thank Rebecca Diamond for helpful comments. 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