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House prices and rents: a reappraisal

Author

Listed:
  • Bertrand Achou
  • Hippolyte d'Albis
  • Eleni Iliopulo

Abstract

In this work we introduce rental markets in a general equilibrium model with borrowing constraints and infinitely lived agents. We estimate our model using standard Bayesian methods and match US data on recent decades. We highlight a crucial relationship that strongly links interest rates, house prices, and rents. It represents agents’ arbitrage when choosing their degree of participation in the housing market (i.e., their real estate holdings). This framework is particularly well suited for explaining recent trends in housing markets. It also allows us to parsimoniously track the unequal impact of shocks on agents’ decisions and welfare, depending on their housing status.

Suggested Citation

  • Bertrand Achou & Hippolyte d'Albis & Eleni Iliopulo, 2021. "House prices and rents: a reappraisal," Cahiers de recherche / Working Papers 6, Institut sur la retraite et l'épargne / Retirement and Savings Institute.
  • Handle: RePEc:rsi:irersi:6
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    References listed on IDEAS

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    More about this item

    Keywords

    Housing; Rental Markets; Collateral Constraints; Financial Frictions;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • G1 - Financial Economics - - General Financial Markets
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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