Unravelling the Residential Rent-Value Puzzle: An Empirical Investigation
- 1 December 1988
- journal article
- Published by SAGE Publications in Urban Studies
- Vol. 25 (6) , 487-496
- https://doi.org/10.1080/00420988820080651
Abstract
This paper tests empirically whether observed variation in the relationship between residential rents and housing prices in US metropolitan areas during the 1974-79 period can be attributed to differences in the user cost of residential capital. Consistent with user cost models, house values are found to be high relative to market rents where real after-tax financing costs are low and where expected capital gains from appreciation are large. At the same time, high rental vacancies, lagging rents and high inflation rates per se also are found to raise structure prices relative to market-clearing rents, suggesting significant adjustment lags from the durability of the housing stock, transaction costs, and segmentation between owner and rental submarkets.Keywords
This publication has 16 references indexed in Scilit:
- Residential capitalization rates: Explaining intermetropolitan variation, 1974–1979Journal of Urban Economics, 1988
- Expectations and Urban Housing PricesUrban Studies, 1985
- Expected appreciation in urban housing marketsJournal of Urban Economics, 1985
- A dymimic model of housing price determinationJournal of Econometrics, 1985
- The Suburban SqueezePublished by University of California Press ,1984
- THE IMPACT OF INFLATION ON NEW HOUSE PRICESContemporary Economic Policy, 1984
- Explaining metropolitan housing price differencesJournal of Urban Economics, 1983
- Inflation, tax rules, and the prices of land and goldJournal of Public Economics, 1980
- Expected Equity Returns on Real Estate Financed with Life Insurance Company Loans: 1967–1977Real Estate Economics, 1980
- Inflation, Mortgage, and HousingJournal of Political Economy, 1979