Investment Returns and Price Discovery in the Market for Owner-Occupied Housing

John Quigley and Christian L. Redfearn

No 8640, Working Paper from USC Lusk Center for Real Estate

Abstract: This paper examines the dynamics of owner-occupied housing prices both at thelevel of the individual dwelling and in aggregate. Using a unique data set, a modelof individual dwelling prices is estimated that represents features of housing marketsmore faithfully than competing models. Statistical tests strongly reject the hypothesisthat individual housing prices follow a random walk in favor of the alternative hypoth-esis that housing prices are mean reverting. This result also holds in aggregate, andprovides an explanation for the \inertia" reported in housing return series. The paperthen demonstrates that real and excess returns are forecastable. Finally, it considersempirically the extent to which the transactions costs associated with home ownershippreclude pro table speculation in owner-occupied housing markets.

Keywords: Owner-Occupied housing; Housing Markets; Homeownership (search for similar items in EconPapers)
Date: 2000
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Persistent link: https://EconPapers.repec.org/RePEc:luk:wpaper:8640

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