House Prices and Rents

23 Pages Posted: 9 Nov 2020 Last revised: 7 Dec 2023

See all articles by Eugene F. Fama

Eugene F. Fama

University of Chicago - Finance

Kenneth R. French

Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)

Date Written: December 5, 2023

Abstract

Variation in monthly metro area house prices unrelated to expected rents clouds the information about future rents in price-rent ratios and lagged changes in house prices. The variation in house prices unrelated to expected rents is, however, correlated across areas, and the problem is mitigated by measuring rent growth regression variables net of their monthly cross-section (across-area) means. This control for price variation unrelated to expected rents substantially enhances the information about future rents that we extract from price-rent ratios and lagged changes in house prices.

Suggested Citation

Fama, Eugene F. and French, Kenneth R., House Prices and Rents (December 5, 2023). Chicago Booth Research Paper No. 20-48, Fama-Miller Working Paper, Available at SSRN: https://ssrn.com/abstract=3726129 or http://dx.doi.org/10.2139/ssrn.3726129

Eugene F. Fama (Contact Author)

University of Chicago - Finance ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7282 (Phone)
773-702-9937 (Fax)

Kenneth R. French

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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