We thank the editor, the referees, Peter Englund, David Geltner, Clemens Kool, and participants to seminars at MIT and Maastricht University, and to the 2007 ASSA Meetings, for their helpful comments and discussion. We also thank METEOR, the economic research school of Maastricht University, for funding Brent Ambrose's stay at Maastricht in 2006. Victor Burger is thanked for his help in the data collection.
House Prices and Fundamentals: 355 Years of Evidence
Article first published online: 17 MAR 2013
© 2013 The Ohio State University
Journal of Money, Credit and Banking
Volume 45, Issue 2-3, pages 477–491, March-April 2013
How to Cite
AMBROSE, B. W., EICHHOLTZ, P. and LINDENTHAL, T. (2013), House Prices and Fundamentals: 355 Years of Evidence. Journal of Money, Credit and Banking, 45: 477–491. doi: 10.1111/jmcb.12011
- Issue published online: 17 MAR 2013
- Article first published online: 17 MAR 2013
- Received September 11, 2008; and accepted in revised form January 30, 2012.
- asset price bubbles;
- price-rent ratio;
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.