This paper tests the present value relation (PVR) for a set of 23 large housing markets across the United States. The PVR implies two testable hypotheses: housing markets are at least weakly efficient; and there is a cointegrating relationship between price and rent series. The test results suggest that the PVR holds in the long run. They also provide some insights into housing price sensitivity to changes in expected returns and the possible impact of persistence in inflation series on short-run housing price dynamics.
"Testing the Present Value Relation in Large Housing Markets and Housing Price Sensitivity to Changes in Expected Returns,"
Undergraduate Economic Review: Vol. 1
, Article 7.
Available at: http://digitalcommons.iwu.edu/uer/vol1/iss1/7