Relationship between Residential Rents and House Values: Explaining Intertemporal and Cross-Sectional Variation, 1974-1979

摘要

In sum, efforts to impute housing capitalization rates for individual metropolitan areas for specific years using information on market rents and house values from the Annual Housing Survey indicate that residential capitalization rates generally trended downward during the latter half of the 1970's, primarily due to slack rental markets and strong demand for homeownership arising in part from expectations of rapid appreciation in house values and from low real after-tax mortgage rates from accelerating inflation. Capitalization rates fell dramatically in metropolitan areas where housing prices appreciated rapidly -- particularly Los Angeles, San Francisco and Washington D.C. -- where average house prices rose in excess of 20 percent a year during the 1974-1979 period. For these markets, expectations of continued rapid gains in housing prices were capitalized into higher asset values despite lagging rents. The considerable variation in metropolitan housing capitalization rates during the 1974-1979 period documented by the study clearly demonstrates evidence that house values and market rents are not in a fixed relationship with one another.