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Pricing Factors in Real Estate Markets: A Simple Preference Based Approach

Conventional wisdom tells us that the price level of properties should be supported by the rent they receive. This paper examines the pricing factors of properties by analyzing how individuals allocate their income to housing consumption and other goods, which in turn become the rent (or implicit rent) to support property values. Our model’s results can explain several puzzling observations in property markets, including why the variance of property appreciation rates is much higher than that of income growth rates in the same area.

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Article provided by Asian Real Estate Society in its journal International Real Estate Review.

Volume (Year): 6 (2003)
Issue (Month): 1 ()
Pages: 102-120

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Handle: RePEc:ire:issued:v:06:n:01:2003:p:102-120
Contact details of provider: Postal: Asia Real Estate Society, 51 Monroe Street, Plaza E-6, Rockville, MD 20850, USA
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Order Information: Postal: Asian Real Estate Society, 51 Monroe Street, Plaza E-6, Rockville, MD 20850, USA
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  1. G. Donald Jud & Dan T. Winkler, 2002. "The Dynamics of Metropolitan Housing Prices," Journal of Real Estate Research, American Real Estate Society, vol. 23(1/2), pages 29-46.
  2. Quigley, John M., 2002. "Real Estate Prices and Economic Cycles," Berkeley Program on Housing and Urban Policy, Working Paper Series qt58c6v2kx, Berkeley Program on Housing and Urban Policy.
  3. Walter Dolde & Dogan Tirtiroglu, 2002. "Housing Price Volatility Changes and Their Effects," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 30(1), pages 41-66.
  4. Norman Miller & Liang Peng, 2006. "Exploring Metropolitan Housing Price Volatility," The Journal of Real Estate Finance and Economics, Springer, vol. 33(1), pages 5-18, August.
  5. Muellbauer, J & Murphy, A, 1996. "Booms and Busts in the UK Housing Market," Economics Papers 125, Economics Group, Nuffield College, University of Oxford.
  6. D.R. Capozza & C. Mack & P.H. Hendershott & C.J. Mayer, 2002. "The Determinants of House Price Dynamics," ERES eres2002_106, European Real Estate Society (ERES).
  7. Clapp John M. & Giaccotto Carmelo, 1994. "The Influence of Economic Variables on Local House Price Dynamics," Journal of Urban Economics, Elsevier, vol. 36(2), pages 161-183, September.
  8. Ko Wang & Yuqing Zhou & Su Han Chan & K. W. Chau, 2000. "Over-Confidence and Cycles in Real Estate Markets: Cases in Hong Kong and Asia," International Real Estate Review, Asian Real Estate Society, vol. 3(1), pages 93-108.
  9. Ko Wang & Yuqing Zhou, 2000. "Overbuilding: A Game-Theoretic Approach," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 28(3), pages 493-522.
  10. John D. Benjamin & Peter Chinloy & G. Donald Jud, 2004. "Why do Households Concentrate Their Wealth in Housing?," Journal of Real Estate Research, American Real Estate Society, vol. 26(4), pages 329-344.
  11. Richard Green, . "Can We Explain the Santa Clara County Housing Market?," Wisconsin-Madison CULER working papers 01-13, University of Wisconsin Center for Urban Land Economic Research.
  12. Dennis R. Capozza & Patric H. Hendershott & Charlotte Mack & Christopher J. Mayer, 2002. "Determinants of Real House Price Dynamics," NBER Working Papers 9262, National Bureau of Economic Research, Inc.
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