House prices and fundamentals: 355 years of evidence

B. Ambrose; P.M.A. Eichholtz; T. Lindenthal

doi:10.1111/jmcb.12011

House prices and fundamentals: 355 years of evidence

B. Ambrose^*, P.M.A. Eichholtz, T. Lindenthal

^*Corresponding author for this work

Finance

Research output: Contribution to journal › Article › Academic › peer-review

Abstract

This paper examines the long-run relation between prices and rents for houses in Amsterdam from 1650 to 2005. We estimate the deviation of house prices from fundamentals and find that these deviations can be persistent and long-lasting. Furthermore, we look at the feedback mechanisms between housing market fundamentals and prices, and find that market correction of the mispricing occurs mainly through prices not rents. This correction back to equilibrium, however, can take decades.

Original language	English
Pages (from-to)	477-491
Journal	Journal of Money Credit and Banking
Volume	45
Issue number	2-3
DOIs	https://doi.org/10.1111/jmcb.12011
Publication status	Published - 1 Jan 2013

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10.1111/jmcb.12011

Cite this

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title = "House prices and fundamentals: 355 years of evidence",

abstract = "This paper examines the long-run relation between prices and rents for houses in Amsterdam from 1650 to 2005. We estimate the deviation of house prices from fundamentals and find that these deviations can be persistent and long-lasting. Furthermore, we look at the feedback mechanisms between housing market fundamentals and prices, and find that market correction of the mispricing occurs mainly through prices not rents. This correction back to equilibrium, however, can take decades.",

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AB - This paper examines the long-run relation between prices and rents for houses in Amsterdam from 1650 to 2005. We estimate the deviation of house prices from fundamentals and find that these deviations can be persistent and long-lasting. Furthermore, we look at the feedback mechanisms between housing market fundamentals and prices, and find that market correction of the mispricing occurs mainly through prices not rents. This correction back to equilibrium, however, can take decades.

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