Home Ownership and Real House Prices: Sources of Change, 1965-85

34 Pages Posted: 15 Jan 2007 Last revised: 20 Feb 2021

See all articles by Patric H. Hendershott

Patric H. Hendershott

University of Aberdeen - Centre for Property Research; National Bureau of Economic Research (NBER)

Date Written: May 1987

Abstract

Two phenomena characterized the housing market in the 1970s: a somewhat-disguised surge toward home ownership and a well-publicized sharp increase in the real price of housing. These movements were partially reversed in the first half of the 1980s. In the "standard view", the 1970s changes are attributed to an interaction of the tax system and rising inflation. Given the disinflation of the 1980s, this explanation also seems consistent with the reversals in ownership and real prices. Recent work challenges the standard view. Inflation is said to disfavor home ownership, and real house prices are said to be determined largely by supply (cost), not demand, factors. This paper considers the data on home ownership and real house prices and evaluates the standard view vis-a-vis its challengers. Data from the 1980s suggest that other factors (probably rising income for ownership and negative construction productivity growth for real prices) were responsible for at least half of the 1970s increase in ownership and real price.

Suggested Citation

Hendershott, Patric H., Home Ownership and Real House Prices: Sources of Change, 1965-85 (May 1987). NBER Working Paper No. w2245, Available at SSRN: https://ssrn.com/abstract=347028

Patric H. Hendershott (Contact Author)

University of Aberdeen - Centre for Property Research ( email )

Aberdeen AB24 2UF
Scotland

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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