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The Rent-Price Ratio For The Aggregate Stock Of Owner-Occupied Housing

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  • Morris A. Davis
  • Andreas Lehnert
  • Robert F. Martin

Abstract

We construct a quarterly time series of the rent-price ratio for the aggregate stock of owner-occupied housing in the United States, starting in 1960, by merging micro data from the last five Decennial Censuses of Housing surveys with price indexes for house prices and rents. We show that the rent-price ratio ranged between 5 and 5.5 percent between 1960 and 1995, but rapidly declined after 1995. By year-end 2006, the rent-price ratio reached a historic low of 3.5 percent. For the rent-price ratio to return to its historical average over, say, the next five years, house prices likely would have to fall considerably. Copyright 2008 The Authors. Journal compilation International Association for Research in Income and Wealth 2008.

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Bibliographic Info

Article provided by International Association for Research in Income and Wealth in its journal Review of Income and Wealth.

Volume (Year): 54 (2008)
Issue (Month): 2 (06)
Pages: 279-284

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Handle: RePEc:bla:revinw:v:54:y:2008:i:2:p:279-284

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  1. Meese Richard & Wallace Nancy, 1994. "Testing the Present Value Relation for Housing Prices: Should I Leave My House in San Francisco?," Journal of Urban Economics, Elsevier, vol. 35(3), pages 245-266, May.
  2. Theodore M. Crone & Leonard I. Nakamura & Richard P. Voith, 2004. "Hedonic estimates of the cost of housing services: rental and owner-occupied units," Working Papers 04-22, Federal Reserve Bank of Philadelphia.
  3. Morris A. Davis & Robert F. Martin, 2005. "Housing, house prices, and the equity premium puzzle," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2005-13, Board of Governors of the Federal Reserve System (U.S.).
  4. Richard K. Green & Amy Crews Cutts & Yan Chang, 2005. "Did Changing Rents Explain Changing House Prices During the 1990s?," Working Papers, School of Business, The George Washington University 0005, School of Business, The George Washington University.
  5. David E. Lebow & Jeremy B. Rudd, 2003. "Measurement Error in the Consumer Price Index: Where Do We Stand?," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 41(1), pages 159-201, March.
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