This paper examines the relationship between housing supply elasticity and housing bubbles. The authors present a model showing that areas with more elastic housing supply experience fewer and shorter bubbles, with smaller price increases. However, these areas may suffer greater welfare losses due to overbuilding during bubbles. The data show that the 1980s housing price run-ups were primarily experienced in cities with inelastic housing supply. More elastic areas had slightly larger increases in building during that period. Over the past five years, a modest number of more elastic places also experienced large price booms, but these booms were short-lived, with prices moving back towards construction costs. The paper also discusses the impact of housing supply elasticity on the duration and size of housing bubbles. It shows that more elastic areas have more construction during a bubble, but the bubbles are shorter. The model predicts that building during a bubble causes post-bubble prices to drop below pre-bubble levels. The impact of housing supply elasticity on the size of the post-bubble drop is ambiguous because more elastic places have more construction during a bubble, but their bubbles are shorter. The authors use data on housing prices, new construction, and supply elasticity during periods of price booms and busts to support their findings. They find that more inelastic places had much larger increases in prices and much smaller increases in new construction during both the 1980s boom and the post-1996 boom. However, in the years since 1996, there were a number of highly elastic places that had temporary price explosions despite no visible decline in construction intensity. The paper concludes that housing bubbles are more likely to be short-lived in areas with more elastic housing supply. The data indicate that the average duration of a bubble in more elastic areas was 1.7 years, compared to over four years in inelastic areas. The paper also finds that the mean reversion of housing prices was more severe in more inelastic places, but on average, elasticity was uncorrelated with either price or quantity changes during the bust.This paper examines the relationship between housing supply elasticity and housing bubbles. The authors present a model showing that areas with more elastic housing supply experience fewer and shorter bubbles, with smaller price increases. However, these areas may suffer greater welfare losses due to overbuilding during bubbles. The data show that the 1980s housing price run-ups were primarily experienced in cities with inelastic housing supply. More elastic areas had slightly larger increases in building during that period. Over the past five years, a modest number of more elastic places also experienced large price booms, but these booms were short-lived, with prices moving back towards construction costs. The paper also discusses the impact of housing supply elasticity on the duration and size of housing bubbles. It shows that more elastic areas have more construction during a bubble, but the bubbles are shorter. The model predicts that building during a bubble causes post-bubble prices to drop below pre-bubble levels. The impact of housing supply elasticity on the size of the post-bubble drop is ambiguous because more elastic places have more construction during a bubble, but their bubbles are shorter. The authors use data on housing prices, new construction, and supply elasticity during periods of price booms and busts to support their findings. They find that more inelastic places had much larger increases in prices and much smaller increases in new construction during both the 1980s boom and the post-1996 boom. However, in the years since 1996, there were a number of highly elastic places that had temporary price explosions despite no visible decline in construction intensity. The paper concludes that housing bubbles are more likely to be short-lived in areas with more elastic housing supply. The data indicate that the average duration of a bubble in more elastic areas was 1.7 years, compared to over four years in inelastic areas. The paper also finds that the mean reversion of housing prices was more severe in more inelastic places, but on average, elasticity was uncorrelated with either price or quantity changes during the bust.