The equilibrium effect of fundamentals on house prices and rents

Sommer, Kamila; Sullivan, Paul; Verbrugge, Randal J.

doi:10.1016/j.jmoneco.2013.04.017

Cited by 130 publications

(72 citation statements)

References 35 publications

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“…Hence, an exogenous, unexpected increase in interest rates may translate into a significant decrease in the borrowing volume and a drop in housing prices [see, for instance, Sommer et al . ()]. This interest rate risk transmission channel is proxied by the ratio of the hypothetical borrowing volume

B_{t}

using the 3‐month EUR EURIBOR rate vs. the same metric using the Taylor‐rule implied interest rate (see Figure (middle panel) for the resulting time series after mean‐centering and standardizing this ratio):

\frac{B_{t} (R_{t} = 3m EURIBOR)}{B_{t} (R_{t} = Taylor)} .

The use of the Taylor interest rate as a benchmark can be motivated by the following two academic contributions.…”

Section: Methodsmentioning

confidence: 99%

“…a decrease of B t by 1% is associated with a decrease in prices by at least 0.8%). Hence, an exogenous, unexpected increase in interest rates may translate into a significant decrease in the borrowing volume and a drop in housing prices [see, for instance, Sommer et al (2013)]. This interest rate risk transmission channel is proxied by…”

Section: Interest Rate Risk ('Taylor Rule Residuals')mentioning

confidence: 99%

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A Novel Housing Price Misalignment Indicator for Germany

Hertrich

2019

German Economic Review

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From 2014 until present, housing prices in Germany have been rising faster than consumer prices in all quarters except one, raising concerns about an excessive overheating of the housing market. To assess the vulnerability of the German housing market to a future realignment of prices or even a housing bust, this paper develops a housing price misalignment indicator that is composed of seven indicators, which are commonly associated with the fundamental value of residential property. An empirical application to the most recent data suggests that the German housing market exhibits an overvaluation of approximately 11%, where interest rate risk and a relatively advanced stage of the housing cycle are identified as the main factors fueling these imbalances, while a rather solid debt‐servicing capacity mitigates these imbalances since end‐2009.

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B_{t}

\frac{B_{t} (R_{t} = 3m EURIBOR)}{B_{t} (R_{t} = Taylor)} .

The use of the Taylor interest rate as a benchmark can be motivated by the following two academic contributions.…”

Section: Methodsmentioning

confidence: 99%

Section: Interest Rate Risk ('Taylor Rule Residuals')mentioning

confidence: 99%

A Novel Housing Price Misalignment Indicator for Germany

Hertrich

2019

German Economic Review

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“…In our model, it is not the amount of borrowing but the risk of the borrower that determines who gets the largest subsidy. Low-income mortgagors receive the 5 Some examples include Arslan, Guler, and Taskin (2015); Chatterjee and Eyigungor (2015); Chu (2014); Corbae and Quintin (2015); Díaz and Luengo-Prado (2010);Guler (2015); Hatchondo, Martinez, and Sánchez (2014); Iacoviello and Pavan (2013); Li et al (2016);Mitman (2016); Silos (2007); or Sommer, Sullivan, and Verbrugge (2013). Gete and Reher (2016) solve for the closed-form solutions of a model with aggregate shocks but deterministic heterogeneity.…”

Section: Related Literaturementioning

confidence: 99%

Distributional Implications of Government Guarantees in Mortgage Markets

Gete

Zecchetto²

2017

The Review of Financial Studies

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We analyze the removal of the credit-risk guarantees provided by the governmentsponsored enterprises (GSEs) in a model with agents heterogeneous in income and house price risk. We find that wealth inequality increases, driven by higher mortgage spreads and housing rents. Housing holdings become more concentrated. Foreclosures fall. The removal benefits high-income households, while hurting low-and mid-income households (renters and highly leveraged mortgagors with conforming loans). GSE reform requires compensating transfers, sufficiently high elasticity of rental supply, or linking GSE reform with the elimination of the mortgage interest deduction. (JEL E51, H81, G21, R2) * We thank

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“…Predicting rental price is a popular economic research topic that has been well studied by economist [8,9,1,14]. For example, Gallin et al [8] investigate the relationship between house prices and rents.…”

Section: Related Workmentioning

confidence: 99%

Price Recommendation on Vacation Rental Websites

Yang

Wang²,

Yang

et al. 2017

Proceedings of the 2017 SIAM International Conference on Data Mining

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Vacation rental websites such as Airbnb have become increasingly popular where rentals are typically short-term and travels or vacations related. Reasonable rental prices play a crucial role in improving user experiences and engagements in these websites. However, the unique properties of their rentals challenge traditional house rentals that are often long-term and study or work related. Therefore, in this paper we investigate the novel problem of price recommendation in vacation rental websites. We identify some important factors that affect the rental prices and propose a framework that consists of Multi-Scale Affinity Propagation (MSAP) to cluster houses, Nash Equilibrium filter to remove unreasonable price and Linear Regression model with Normal Noise (LRNN) to predict the reasonable prices. Experimental results demonstrate the effectiveness of the proposed framework. We conduct further experiments to understand the important factors in rental price recommendation.

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The equilibrium effect of fundamentals on house prices and rents

Cited by 130 publications

References 35 publications

A Novel Housing Price Misalignment Indicator for Germany

A Novel Housing Price Misalignment Indicator for Germany

Distributional Implications of Government Guarantees in Mortgage Markets

Price Recommendation on Vacation Rental Websites

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