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Risk and return in the single-family housing market

Author

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  • Theodore M. Crone
  • Richard Voith

Abstract

The tradeoff between risk and return in equity markets is well established. This paper examines the existence of the same tradeoff in the single-family housing market. For home buyers, who constitute about two-thirds of U.S. households, the choice about how much housing and which house to buy is a joint consumption/investment decision. Does this consumption/investment link negate the risk/return tradeoff within the single-family hosuing market? Theory suggests the link still holds. This paper supplies empirical evidence in support of that theoretical result.

Suggested Citation

  • Theodore M. Crone & Richard Voith, 1996. "Risk and return in the single-family housing market," Working Papers 96-16, Federal Reserve Bank of Philadelphia.
  • Handle: RePEc:fip:fedpwp:96-16
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    File URL: http://www.philadelphiafed.org/research-and-data/publications/working-papers/1996/wp96-16.pdf
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    References listed on IDEAS

    as
    1. Berkovec, James, 1989. "A General Equilibrium Model of Housing Consumption and Investment," The Journal of Real Estate Finance and Economics, Springer, vol. 2(3), pages 157-172, September.
    2. Crone, Theodore M. & Voith, Richard P., 1992. "Estimating house price appreciation: A comparison of methods," Journal of Housing Economics, Elsevier, vol. 2(4), pages 324-338, December.
    3. Karl E. Case, 1989. "The Asset Approach to Pricing Urban Land: Empirical Evidence," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(2), pages 175-176.
    4. Roger G. Ibbotson & Laurence B. Siegel, 1984. "Real Estate Returns: A Comparison with Other Investments," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 12(3), pages 219-242.
    5. Case, Karl E & Shiller, Robert J, 1989. "The Efficiency of the Market for Single-Family Homes," American Economic Review, American Economic Association, vol. 79(1), pages 125-137, March.
    6. Gat, Daniel, 1994. "Risk and Return in Residential Spatial Markets: An Empiric and Theoretic Model," The Journal of Real Estate Finance and Economics, Springer, vol. 9(1), pages 51-67, July.
    7. Dennis R. Capozza & Gregory M. Schwann, 1989. "The Asset Approach to Pricing Urban Land: Empirical Evidence," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(2), pages 161-174.
    8. William N. Goetzmann & Roger G. Ibbotson, 1990. "The Performance Of Real Estate As An Asset Class," Journal of Applied Corporate Finance, Morgan Stanley, vol. 3(1), pages 65-76.
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    Keywords

    Housing ; Regional economics;

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