House prices and rents: a reappraisal

Bertrand Achou, Hippolyte d'Albis and Eleni Iliopulo

Cahiers de recherche / Working Papers from Institut sur la retraite et l'épargne / Retirement and Savings Institute

Abstract: In this work we introduce rental markets in a general equilibrium model with borrowing constraints and infinitely lived agents. We estimate our model using standard Bayesian methods and match US data on recent decades. We highlight a crucial relationship that strongly links interest rates, house prices, and rents. It represents agents’ arbitrage when choosing their degree of participation in the housing market (i.e., their real estate holdings). This framework is particularly well suited for explaining recent trends in housing markets. It also allows us to parsimoniously track the unequal impact of shocks on agents’ decisions and welfare, depending on their housing status.

Keywords: Housing; Rental Markets; Collateral Constraints; Financial Frictions (search for similar items in EconPapers)
JEL-codes: C1 E3 G1 I3 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-dge, nep-fdg, nep-isf, nep-mac, nep-ore and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:rsi:irersi:6

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