What moves housing markets: A variance decomposition of the rent–price ratio

Campbell, Sean D.; Davis, Morris A.; Gallin, Joshua; Martin, Robert F.

doi:10.1016/j.jue.2009.06.002

Cited by 378 publications

(310 citation statements)

References 40 publications

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“…To gain more insight on the rationale behind these econometric tests for bubbles, I follow Campbell et al (2009) and present a theoretical home pricing model for the housing market. I rst denote the de nition of the realized real gross return for holding a home for one period by…”

Section: The Modelmentioning

confidence: 99%

“…This paper addresses the question of whether recent home price appreciation in Israel re ects the existence of a national or regional housing bubble or whether it is just the result of changes in fundamental supply and demand factors. To answer this question, I integrate a housing market version of the dynamic Gordon growth model (Campbell et al, 2009), as well as advanced econometric bubble detection and monitoring strategies (Phillips et al, , 2013bHomm and Breitung, 2012). The dynamic Gordon growth model decomposes changes in the price to rent ratio into changes in the expected paths of rent price growth rates, risk-free rates and risk premiums.…”

Section: Introductionmentioning

confidence: 99%

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Testing for a Housing Bubble at the National and Regional Level: The Case of Israel

Caspi¹

2015

gwp

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Between 2008 and 2013, home prices in Israel appreciated by roughly 50 percent in real terms, with increases of nearly 60 percent in some regions. This paper examines whether this phenomenon reflects the presence of a national or regional housing bubble by applying econometric tests for explosive behavior to quality adjusted national and regional level data on the home price to rent ratio, while controlling for various fundamental factors, including interest rates, income and the leverage ratio. Overall, study results indicate that the recent housing price appreciations at the national and regional levels are consistent with the developments of the fundamentals -supply and demand factors that are represented by rent payments and interest rates -and not with a housing bubble scenario. Most of the results are robust to a variety of tests and alternate specifications. The framework I provide to study the Israeli case may be applied to study other housing markets facing similar developments.

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Section: The Modelmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Testing for a Housing Bubble at the National and Regional Level: The Case of Israel

Caspi¹

2015

gwp

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“…However, an interested reader might find the following citations of use. For discussions of the explanatory potential of interest rates, see Glaeser, Gottlieb, and Gyourko (2010) ;Himmelberg, Mayer, and Sinai (2005); Mayer and Sinai (2009);and Campbell et al (2009). For subprime lending, see Pavlov and Wachter (2009) ;Mian and Sufi (2009); Wheaton and Nechayev (2008); and Lai and Van Order (2010).…”

Section: House Price Moments In Boom-bust Cyclesmentioning

confidence: 99%

“…One approach is to compare the rental value and prices for a set of matched rental and owner-occupied houses, as in Smith and Smith (2006). Another strategy is to assume that the growth rate in apartment rents, which are observed, is a good proxy for the growth rate in the unobserved rental value of owneroccupied housing, as in Himmelberg, Mayer, and Sinai (2005) or Campbell et al (2009). A third tactic is to use demand shifters, such as household income, to estimate rental value within the context of an economic model, as in Glaeser, Gottlieb, and Gyourko's chapter in this volume.…”

Section: House Price Cycles Remain After Controlling For Demand Fundamentioning

confidence: 99%

House Price Moments in Boom-Bust Cycles

Sinai¹

2013

Housing and the Financial Crisis

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“…First, some researchers have argued that there is little support in the data for a close link between interest rates and house prices. Campbell et al (2009) looked at the price-rent ratio and argued that:…”

Section: The Economic Effects Of the Lsap Programmentioning

confidence: 99%

$1.25 Trillion is Still Real Money: Some Facts About the Effects of the Federal Reserve’s Mortgage Market Investments

Fuster

Willen

2010

SSRN Journal

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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. We use an event-study approach and measure the movements in both prices and quantities around the initial announcement of the LSAP and subsequent changes to the program. We use a new dataset to document the changes in the menu of rates and points offered to borrowers and show that there was wide dispersion in the rate changes generated by the announcement of the LSAP program, with some borrowers seeing immediate rate reductions of up to 40 basis points and other borrowers confronting rate increases. We show that the LSAP program led to a substantial boost in market activity, with discontinuous increases in searches, applications and originations for refinance mortgages, but not purchase mortgages. Finally, we show that more creditworthy borrowers were significantly more likely to benefit from the improved credit availability. Terms of use: Documents in EconStor may

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What moves housing markets: A variance decomposition of the rent–price ratio

Cited by 378 publications

References 40 publications

Testing for a Housing Bubble at the National and Regional Level: The Case of Israel

Testing for a Housing Bubble at the National and Regional Level: The Case of Israel

House Price Moments in Boom-Bust Cycles

$1.25 Trillion is Still Real Money: Some Facts About the Effects of the Federal Reserve’s Mortgage Market Investments

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