Deriving the Rent versus Buy Decision in the Absence of Expected Home Price Appreciation or Risk Premia

Cristian Voicu and Michael Seiler ()

Journal of Housing Research, 2013, vol. 22, issue 1, 33-37

Abstract: The paper extends the work of Poterba (1984, 1991) and Voicu and Seiler (2013) by mathematically deriving the optimum rent versus buy decision without any information relating to expected home price appreciation or risk premia. Using Chicago Mercantile Exchange housing futures contracts, we empirically demonstrate that renting was financially preferred to owning over the sample period. Our findings are consistent with recent work by Beracha and Johnson (2012) even though an entirely different approach was taken.

Date: 2013
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DOI: 10.1080/10835547.2013.12092064

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