Explosive rents: The real estate market dynamics in exuberance

Frank Fabozzi () and Keli Xiao

The Quarterly Review of Economics and Finance, 2017, vol. 66, issue C, 100-107

Abstract: The interaction of the trading behavior of market participants in the housing and rental markets can result in a boom and bust in both markets. In this paper, we model real estate equilibrium with a focus on a short-run view and study the explosiveness in the rental market by analyzing the impact of housing market exuberance on rents. We then demonstrate the situation in which explosive behavior may appear in the rental market. The explosiveness in rents is tested based on samples from January 1991 to February 2015 in the U.S. housing market. Our results confirm the appearance of explosive rents during housing bubbles in five urban areas where explosive prices are also found, while no evidence of explosive rent can be found in the U.S. S&P/Case–Shiller Home Price Index-Composite 10.

Keywords: Rent explosiveness; Real estate bubbles; Housing market; Explosive behavior (search for similar items in EconPapers)
JEL-codes: C01 R21 R31 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:66:y:2017:i:c:p:100-107

DOI: 10.1016/j.qref.2017.07.006

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