The Long-Run Relationship between House Prices and Rents

Gallin, Joshua

doi:10.2139/ssrn.633082

Cited by 152 publications

(184 citation statements)

References 19 publications

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“…Gallin (2008), Plazzi, Torous, and Valkanov (2010), and Engsted and Pedersen (2012) (see Ghysels, Plazzi, Torous, and Valkanov (2012) for a survey on forecasting real estate prices). Our study is also related to an extensive literature analyzing the role of expectations in house price determination, see e.g.…”

Section: Introductionmentioning

confidence: 99%

Housing market volatility in the OECD area: Evidence from VAR based return decompositions

Engsted

Pedersen

2014

Journal of Macroeconomics

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Vector-autoregressive models are used to decompose housing returns in 18 OECD countries into cash ‡ow (rent) news and discount rate (return) news. Only for two countries -Germany and Ireland -do changing expectations of future rents play a dominating role in explaining housing return volatility. For the majority of countries news about future returns is the main driver, and both real interest rates and risk premia play an important role in accounting for housing market volatility. Bivariate cross-country correlations and principal components analyses indicate that part of the return movements have a common factor among the majority of countries. However, in a minority of countries (Germany, Japan, and the Netherlands) return movements have been basically unrelated to return movements in other countries.JEL Classi…cation: C32, G12, R31

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Section: Introductionmentioning

confidence: 99%

Housing market volatility in the OECD area: Evidence from VAR based return decompositions

Engsted

Pedersen

2014

Journal of Macroeconomics

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“…They demonstrated disparity between US house prices, population increases and building costs and suggested there is a strong element of speculation in the current housing market that is not justified by fundamentals. Gallin (2004) also used US data to explore the long run relationship between house prices and rents. Gallin concluded that house prices do correct back to rents rather than rents correcting to house prices.…”

Section: Introductionmentioning

confidence: 99%

What do rents tell us about house prices?

Hargreaves

2008

International Journal of Housing Markets and Analysis

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“…Nor do we analyze whether the housing market was overvalued in 2005 and 2006, and whether a collapse of house prices was therefore, to some extent, predictable. There was a lively debate during that period, with some arguing that housing was reasonably valued (see Himmelberg, Mayer, andSinai 2005 andMcCarthy andPeach 2004) and others arguing that it was overvalued (see Gallin 2006, Gallin 2008, and Davis, Lehnert, and Martin 2008.…”

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Making Sense of the Subprime Crisis

Gerardi¹,

Lehnert²,

Sherlund³

et al. 2010

Lessons From the Financial Crisis

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. However, the authors show that while loans originated in this period did carry extra risk factors, particularly increased leverage, underwriting standards alone cannot explain the dramatic rise in foreclosures. Focusing on the role of house prices, the authors ask whether market participants underestimated the likelihood of a fall in house prices or the sensitivity of foreclosures to house prices. The authors show that, given available data, market participants should have been able to understand that a significant fall in prices would cause a large increase in foreclosures, although loan-level (as opposed to ownership-level) models would have predicted a smaller rise than actually occurred. Examining analyst reports and other contemporary discussions of the mortgage market to see what market participants thought would happen, the authors find that analysts, on the whole, understood that a fall in prices would have disastrous consequences for the market but assigned a low probability to such an outcome. Terms of use: Documents in

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The Long-Run Relationship between House Prices and Rents

Cited by 152 publications

References 19 publications

Housing market volatility in the OECD area: Evidence from VAR based return decompositions

Housing market volatility in the OECD area: Evidence from VAR based return decompositions

What do rents tell us about house prices?

Making Sense of the Subprime Crisis

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