GoKawiilInternational investment and local rules push prices up faster than supply
Based on the research of Caitlin Gorback
It’s no secret that U.S. housing has gotten less affordable. From 2019 to 2025, average home prices rose 60%, according to the Harvard Joint Center for Housing Studies.
New research from the McCombs School of Business identifies a novel factor in rising prices: foreign investment. An influx of foreign money during the 2010s drove up housing costs in the areas with the greatest concentrations of purchasers from outside the U.S., finds Caitlin Gorback, assistant professor of finance.
But her findings have broader implications for affordability, she says. Even in markets where foreign investors weren’t plentiful, prices rose much faster than supply did from 2009 to 2018.
Supply elasticity — the rate at which builders respond to higher prices by putting up new homes — was much lower during that period than before 2000. For every 1% increase in housing prices nationwide, housing supply increased only 0.26%.
“The supply landscape in U.S. cities has changed meaningfully in the past 20 years,” Gorback says, adding that builders have not responded with sufficient supply to offset rising prices.
Capital Flight and Housing Costs
Foreign investment rose in the U.S. housing market after 2011, her research found. That’s when Singapore became the first country to implement a tax on foreign homebuyers, setting off similar measures in other countries.
Looking for a less costly country, many international buyers found the U.S. It was among the few with high immigrant populations and no such tax on foreign investment in housing.
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