The Atlanta market is a canonical example of the second type in which supply is highly elastic and demand always is strong enough keep prices at MPPC. This is the textbook example also depicted in Figure 3 in which demand intersects supply on its horizontal part. If demand grows by a little or a lot, a sufficient number of units is delivered so that developers cannot earn above normal profits. Figure 5 shows what happened to permitting activity in this market. New supply is highly volatile. Permitting intensity was running at 3% of market size in 1985, but then fell 50% by 1991, as the local economy declined. This was followed by a long building boom, as annual new supply more than doubled to nearly 4.5% of market size in 2005. The onset of the global financial crisis then saw permitting plummet to below 0.5% of market size by 2009, and it has only recently started to increase again in the Atlanta area. Amidst all this variation in new supply, the median owner's price-to-cost ratio never varies much from 1. This is consistent with the supply of housing being highly elastic and demand fluctuating about a horizontal supply schedule.
