Determinants of Differential Rent Changes: Mean Reversion versus the Usual Suspects

Alan Dorfman, William Johnson, Fred Marsh, Robert Poole, Owen Shoemaker and Randal Verbrugge

No 1511, Working Papers (Old Series) from Federal Reserve Bank of Cleveland

Abstract: We study 2001-2004 and 2004-2007 rent growth of 18,000 rental units, ending our study prior to the Great Recession. Which variables correlate with rent growth: Location? Age? Rent level? Occupancy duration? Structure type? The answers deepen understanding of the rental market, help statistical agencies make decisions about sample stratification and substitution, and expose coverage problems. We document significant rent stickiness. Initial relative rent level is the best predictor, though mainly due to mean reversion. \"Location\" comes in second, though often not statistically significantly: the relative value of location is persistent. Age and occupancy duration are also notable. Our findings are reassuring to statistical agencies.

Keywords: location; rent stickiness; mean reversion; inflation measurement (search for similar items in EconPapers)
JEL-codes: E3 L8 R11 R21 R31 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2015-08-05
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Determinants of Differential Rent Changes: Mean Reversion versus the Usual Suspects (2017)
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DOI: 10.26509/frbc-wp-201511

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