Abstract
Most United States MSAs saw their house prices plummet during the recent recession. While many areas are beginning to away from their lowest house prices in recent history, other MSAs are well on their way to house price recovery. One attribute which separates these early winners is their rental tenure. MSAs with higher rental tenure possess a type of occupancy flexibility (modeled as a real option), allowing these areas more liquidity in their housing market which provides the opportunity for quicker house price recovery. I find an economically and statistically significant relationship between increased rental tenure and house price recovery, robust with respect to a wide variety of house price fundamentals. This, paired with other findings which highlight the unique and important role of the renter in housing markets, indicates the importance of incorporating renter-based analysis in housing policy decisions.
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