Expectations, Efficiency, and Euphoria in the Housing Market / Dennis R. Capozza, Paul J. Seguin.

Format:

Book

Author/Creator:

Capozza, Dennis R.

Contributor:

National Bureau of Economic Research.

Seguin, Paul J.

Series:

Working Paper Series (National Bureau of Economic Research) no. w5179.

NBER working paper series no. w5179

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1995.

Summary:

This paper studies expectations of capital appreciation in the housing market. We show that expectations impounded in the rent/price ratio at the beginning of the decade successfully predict appreciation rates, but only if we first control for cross-sectional differences in the quality of rental versus owner-occupied housing. We also demonstrate that observed rent/price ratios contain a disequilibrium component that also has power to forecast subsequent appreciation rates. Finally, we provide evidence consistent with euphoria: participants in housing markets appear to overreact to income growth.

Notes:

Print version record

July 1995.