Interest Rates and Fundamental Fluctuations in Home Values

نویسنده

  • Albert Saiz
چکیده

Fluctuations in housing prices are relevant to wealth accumulation, labor mobility, consumption, macroeconomic volatility, and financial market stability. However, it is ex ante difficult to know when housing price movements are due to fundamentals, such as changes in the user cost of capital, versus irrational exuberance. I propose combining the canonical urban economics Alonso-Muth-Mills model and Poterba (1984, 1990) housing asset-pricing equation to form grounded theoretical expectations about the impact of changes in the user cost of capital on home values. I show rental prices and rental expenditures to be endogenous to interest rates, which limits the applicability of conventional price-to-rent ratios. Expected changes in home values can be expressed as simple functions of the supply elasticity of housing, and the initial share of land relative to prices in a city. The simple formula can be used to diagnose and underwrite home valuations under the null hypothesis of a common shock to the user cost of capital. Empirically, I find that housing supply elasticities and land shares as of 1990 predicted 50% of the variance in price growth during the past boom. Deviations from theoretical growth mean-reverted dramatically during the bust period. JEL: .R21, R31, G12, R14

برای دانلود متن کامل این مقاله و بیش از 32 میلیون مقاله دیگر ابتدا ثبت نام کنید

ثبت نام

اگر عضو سایت هستید لطفا وارد حساب کاربری خود شوید

منابع مشابه

the Exchange Market Pressure and the Central Bank’s Direct Intervention in such a Market in Selected Oil-exporting Countries

The purpose of this study is to investigate the foreign exchange market pressure (EMP) and the impact of domestic and foreign variables in such markets to access the direct intervention of central banks in these markets in selected oil-exporting countries (Iran, Russia, Norway, and Mexico) during1997/1-2017/4, Using the VECM and VAR model. The results show that the general situation of the for...

متن کامل

Evaluate the Fundamental Factors on the World Oil Price

Fluctuations in crude oil prices are among the factors affecting other economic indicators, and therefore these fluctuations have always been of interest to economists. In this paper, the effect of fundamental market factors (supply and demand of crude oil) on changes in world oil prices is addressed and supply and demand elasticity are estimated using the simultaneous equations system consider...

متن کامل

Comparison of motor competence, anthropometric values and body mass index of children aged 4-6 in three environments; kindergarten, home and nursery

Introduction: Childhood is the most important period of human prosperity and the most basic basis for health in the later periods of life, physically, mentally, socially and cognitively. In this regard, one of the most important factors affecting children's overall development is environmental factors. The present study aimed to compare motor competence, developmental dimensions and body mass i...

متن کامل

Simulation, Control and Experimental Analysis of 1,3Butadiene Purification Unit

Simulation of a process and analysis of its resulting data in both dynamic and steady-state conditions are fundamental steps in understanding the process in order to design and efficient control of system as well as implementing operational cost reduction scheme. In the present paper, steady and unsteady state simulation of Amir Kabir1, 3 butadiene purification units has been done by using Aspe...

متن کامل

Investigating the Transmission of Financial Stress Index Fluctuations on Macroeconomic Indicators of Selected Opec Member Countries

Stress in financial markets is defined as the force influencing the behavior of economic agents in the form of uncertainty and changing expectations, the critical values ​​of which are called financial crisis. Increasing oil revenues may have positive effects on aggregate supply through increased investments, especially public sector investment, as well as the import of capital and intermediate...

متن کامل

ذخیره در منابع من


  با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید

برای دانلود متن کامل این مقاله و بیش از 32 میلیون مقاله دیگر ابتدا ثبت نام کنید

ثبت نام

اگر عضو سایت هستید لطفا وارد حساب کاربری خود شوید

عنوان ژورنال:

دوره   شماره 

صفحات  -

تاریخ انتشار 2011