Abstract
The effects of inflation on the housing market are investigated in this study of new house prices in 42 U.S. metropolitan areas from 1971 to 1978. The results show that estimates of the elasticity of real house prices with respect to the real user cost have been biased sharply downward owing to an errors-in-variables problem. When the error term in estimating expected inflation is recognized explicitly, the negative relationship between real house prices and real user cost is found to be very strong. This analysis helps to resolve the conflict in the literature between the negative cash-flow effects and the positive untaxed capital gains and declining real payment effects resulting from inflation.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
