House Prices and Rents
40 Pages Posted: 9 Nov 2020
Date Written: November 3, 2020
Monthly cross-section regressions show that price-to-rent ratios and lagged growth rates of house prices for eleven U.S. metro areas predict variation in the cross-section of rent growth rates. Details of the interplay between house prices and rents pose open questions. What generates the 1998-2012 boom and bust in house prices relative to rents and the subsequent 2012-2020 surge in prices and rents? Why are similar wide swings in house prices relative to rents absent for at least 45 years prior to 1998? General patterns in house prices and rents are shared by many metropolitan areas, but there are large differences of degree, and some areas pass entirely on the boom and bust in 1998-2012 house prices. What explains this diversity?
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