House Prices and Rents in the 21st Century

We study the joint evolution of prices and rents residential property. construct indices for both renter-occupied properties owner-occupied properties. then decompose change in price occupant-owned property into three components: (1) changes rent, (2) relative investor- properties, (3) price-rent ratio. use a simple model to link our decomposition different sources variation house prices. argue that while 2000s boom was plausibly driven by exuberant expectations, 2020s more likely resulted from preference shock.