Image of the day: elastic vs. inelastic supply

In a healthy market, homebuilding responds to changes in demand

From Edward Glaeser and Joseph Gyourko, The Economic Implications of Housing Supply (2018). When housing supply is elastic, you see housing starts going up and down, responding to changes in demand (e.g. a jobs boom), and prices remain stable. When housing supply is inelastic, housing starts remain the same, and you see prices go way up.

In Montreal and Edmonton, the housing supply is elastic - it looks like the top graph. In Toronto and Vancouver, the housing supply is inelastic - it looks like the bottom graph.