House Prices, Rents, and Rent–Price Ratios: California Evidence
Abstract
This article estimates a model in which future rent growth, price growth, and rent–price ratios in California housing markets are related to the current local rent–price ratios and a nationwide variable such as the mortgage rate. I find that the expected future rent growth is negatively related to the current rent–price ratio in the Los Angeles area but is positively related to the current local rent–price ratio in the San Francisco area. The price sensitivity to rent–price ratio is higher in the San Francisco area than in the Los Angeles area. The results are explained by the time series properties of the rent–price ratios in these areas and consistent with the present value model.
Fields of Study & Subjects
Housing Market and Economics
Financial Markets and Investment Strategies
Monetary Policy and Economic Impact
Publication details
- Journal / source
- Journal of Real Estate Research
- Volume
- 48
- Issue
- 3
- Pages
- 480–497
- Publication date
- 14 January 2026
- Language
- EN