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Home Prices Are Overvalued but Will Decline Only Gradually

Jordan Rappaport

Economic Bulletin, 2023, issue February 17, 2023, 4

Abstract: The surge in home prices since the start of the pandemic and the sharp increase in interest rates during 2022 have made purchasing a home much less affordable. Homeownership costs relative to rents suggest home prices are considerably overvalued. However, relief is unlikely in the near future: owners have an incentive to remain in their current homes until rates decrease, mitigating downward pressure on prices.

Keywords: housing prices; rental costs; monetary policy (search for similar items in EconPapers)
JEL-codes: E52 G21 R31 (search for similar items in EconPapers)
Date: 2023
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