HOUSE PRICES AND RENTS AN EQUILIBRIUM ASSET PRICING APPROACH

By J. Ayuso, F. Restoy. 2006

162 citations recorded by the source corpus.

Abstract We use a relatively general intertemporal asset pricing model where housing services and consumption are non-separable to measure overvaluation of housing in relation to rents in Spain, the UK and the US. Part of the increase in real house prices during the late nineties can be seen as a return to equilibrium following some undershooting after previous price peaks. However, marked increases in house prices led to price-to-rent ratios above equilibrium by mid-2003 (around 30% above equilibrium in the UK, 20% in Spain and 10% in the US). Part of that overvaluation — particularly in Spain and the UK — may be attributable to the sluggishness of supply in the presence of large demand shocks in this market and/or the slow adjustment of observed rents.

Subfields: Accounting, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/145438938faac12007cf3283b5f12a6af1ce13fa

Citations in the corpus

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• Real Estate Prices and Bank Stability (2010, unknown): “…from fundamentals rather than focusing solely on price level developments in regional markets (Calomiris and Mason, 2003; McCarthy and Peach, 2004; Ayuso and Restoy, 2006), and absence of bank-level evidence about distress conditional on real estate imbalances and other bank-specific…”