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Did Changing Rents Explain Changing House Prices During the 1990s?

Author

Listed:
  • Richard K. Green

    (The George Washington University School of Business)

  • Amy Crews Cutts

    (Freddie Mac)

  • Yan Chang

    (Freddie Mac)

Abstract

House prices in the United States rose 14 percent in real terms during the 1990s; by historical standards, this was strong performance. Some analysts have worried that this performance was too strong, perhaps indicating an asset bubble, and could not be explained by fundamentals. This paper focuses on this relationship between rent and house value changes in 27 American metropolitan areas through 1998 using hedonic price and rental regressions on American Housing Survey Data to separate the extent to which house value and rent increases were due to changes in the quality of the housing stock, and how much were due to changes in price of housing services. We find that almost all of these markets demonstrated home value and rental growth during the 1990s that was well explained by economic fundamentals.

Suggested Citation

  • Richard K. Green & Amy Crews Cutts & Yan Chang, 2005. "Did Changing Rents Explain Changing House Prices During the 1990s?," Working Papers 0005, School of Business, The George Washington University.
    • Handle: RePEc:gwu:wpaper:0005
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    File URL: http://www.gwu.edu/%7Ebusiness/research/workingpapers/Chang%20Cutts%20and%20Green%203-17-2005%201%20.pdf
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    Cited by:

    1. Rose Neng Lai & Robert Van Order, 2019. "Shadow Banking and the Property Market in China," International Real Estate Review, Global Social Science Institute, vol. 22(3), pages 359-397.
    2. Ting Lan, 2019. "Intrinsic bubbles and Granger causality in the Hong Kong residential property market," Frontiers of Business Research in China, Springer, vol. 13(1), pages 1-15, December.
    3. Randal Verbrugge & Robert Poole, 2010. "Explaining the Rent–OER Inflation Divergence, 1999–2007," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 38(4), pages 633-657, Winter.
    4. Rose Neng Lai & Robert A. Van Order, 2020. "A Tale of Two Countries: Comparing the US and Chinese Housing Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 61(3), pages 505-547, October.
    5. Rose N. Lai & Robert A. Van Order, 2010. "Momentum and House Price Growth in the United States: Anatomy of a Bubble," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 38(4), pages 753-773, Winter.
    6. Jenny Schuetz & Richard K. Green, 2014. "Is The Art Market More Bourgeois Than Bohemian?," Journal of Regional Science, Wiley Blackwell, vol. 54(2), pages 273-303, March.

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