IDEAS home Printed from https://ideas.repec.org/a/pal/buseco/v56y2021i4d10.1057_s11369-021-00241-4.html
   My bibliography  Save this article

Housing preferences during the pandemic: effect on home price, rent, and inflation measurement

Author

Listed:
  • Molly Boesel

    (CoreLogic)

  • Shu Chen

    (CoreLogic)

  • Frank E. Nothaft

    (CoreLogic)

Abstract

With shelter comprising a one-third weight in the Consumer Price Index, an accurate measure of rent change is essential for determining factors affecting inflation measurement, economic policy, and consumer and business decisions. The pandemic led to a shift in consumer demand for more residential space, both in the home’s interior and exterior. With remote work severing the need to be located near the place of employment, some households opted for more space in lower-density areas, moving out of high-rise structures in the urban core to suburban and exurban single-family and low-rise homes, altering the price and rent-growth patterns among single-family detached, attached, and multifamily properties. While measures of rent change are available for multifamily residential properties, none exist for the single-family rental market, which makes up one-half of the residential rental market. The CoreLogic Single-Family Rent Index (SFRI) fills the gap in rent measurement. The SFRI is a repeat-transaction rent index for single-family homes and is available monthly for the U.S., by major metros, by rent price tier and by property type. The SFRI reveals that after 12 months of the pandemic annual rent growth for detached properties was more than 5 percentage points higher than for attached properties. Substituting the SFRI for Owners’ Equivalent Rent, we find that Core CPI inflation would be nearly 2 percentage points higher by mid-2021. To the extent the rapid acceleration in single-family detached rent growth has yet to be reflected in the CPI, inflation measurement will be understated with delayed signals for economic policy makers.

Suggested Citation

  • Molly Boesel & Shu Chen & Frank E. Nothaft, 2021. "Housing preferences during the pandemic: effect on home price, rent, and inflation measurement," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 56(4), pages 200-211, October.
    • Handle: RePEc:pal:buseco:v:56:y:2021:i:4:d:10.1057_s11369-021-00241-4
    DOI: 10.1057/s11369-021-00241-4
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/s11369-021-00241-4
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1057/s11369-021-00241-4?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Arjun Ramani & Nicholas Bloom, 2021. "The Donut Effect of Covid-19 on Cities," NBER Working Papers 28876, National Bureau of Economic Research, Inc.
    2. Karl E. Case & Robert J. Shiller, 1987. "Prices of single-family homes since 1970: new indexes for four cities," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 45-56.
    3. Liu, Sitian & Su, Yichen, 2021. "The impact of the COVID-19 pandemic on the demand for density: Evidence from the U.S. housing market," Economics Letters, Elsevier, vol. 207(C).
    4. Christopher T. Stanton & Pratyush Tiwari, 2021. "Housing Consumption and the Cost of Remote Work," NBER Working Papers 28483, National Bureau of Economic Research, Inc.
    5. Michelle H. Dreiman & Anthony Pennington-Cross, 2004. "Alternative Methods of Increasing the Precision of Weighted Repeat Sales House Prices Indices," The Journal of Real Estate Finance and Economics, Springer, vol. 28(4), pages 299-317, May.
    6. Wang, Ferdinand T. & Zorn, Peter M., 1997. "Estimating House Price Growth with Repeat Sales Data: What's the Aim of the Game?," Journal of Housing Economics, Elsevier, vol. 6(2), pages 93-118, June.
    7. Robert J. Shiller, 1991. "Arithmetic Repeat Sales Price Estimators," Cowles Foundation Discussion Papers 971, Cowles Foundation for Research in Economics, Yale University.
    8. Deng, Yongheng & Gabriel, Stuart A & Nothaft, Frank E, 2003. "Duration of Residence in the Rental Housing Market," The Journal of Real Estate Finance and Economics, Springer, vol. 26(2-3), pages 267-285, March-May.
    9. Goetzmann, William Nelson, 1992. "The Accuracy of Real Estate Indices: Repeat Sale Estimators," The Journal of Real Estate Finance and Economics, Springer, vol. 5(1), pages 5-53, March.
    10. Brent W. Ambrose & N. Edward Coulson & Jiro Yoshida, 2015. "The Repeat Rent Index," The Review of Economics and Statistics, MIT Press, vol. 97(5), pages 939-950, December.
    11. Jordan Rappaport, 2021. "Hybrid Officing Will Shift Where People and Businesses Decide to Locate," Economic Bulletin, Federal Reserve Bank of Kansas City, issue February , pages 1-4, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Brian Adams & Lara Loewenstein & Hugh Montag & Randal Verbrugge, 2024. "Disentangling Rent Index Differences: Data, Methods, and Scope," American Economic Review: Insights, American Economic Association, vol. 6(2), pages 230-245, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Victor Ginsburgh & Jianping Mei & Michael Moses, 2006. "On the computation of art indices in art," ULB Institutional Repository 2013/7290, ULB -- Universite Libre de Bruxelles.
    2. S. Jansen & P. Vries & H. Coolen & C. Lamain & P. Boelhouwer, 2008. "Developing a House Price Index for The Netherlands: A Practical Application of Weighted Repeat Sales," The Journal of Real Estate Finance and Economics, Springer, vol. 37(2), pages 163-186, August.
    3. Howard, Greg & Liebersohn, Jack & Ozimek, Adam, 2023. "The short- and long-run effects of remote work on U.S. housing markets," Journal of Financial Economics, Elsevier, vol. 150(1), pages 166-184.
    4. de Vries, Paul & de Haan, Jan & van der Wal, Erna & Mariën, Gust, 2009. "A house price index based on the SPAR method," Journal of Housing Economics, Elsevier, vol. 18(3), pages 214-223, September.
    5. Bourassa, Steven C. & Hoesli, Martin & Sun, Jian, 2006. "A simple alternative house price index method," Journal of Housing Economics, Elsevier, vol. 15(1), pages 80-97, March.
    6. Liang Peng, 2012. "Repeat Sales Regression on Heterogeneous Properties," The Journal of Real Estate Finance and Economics, Springer, vol. 45(3), pages 804-827, October.
    7. Malik, Khyati & Kim, Sowon & Cultice, Brian J., 2023. "The impact of remote work on green space values in regional housing markets," Journal of Housing Economics, Elsevier, vol. 62(C).
    8. Piermassimo Pavese, 2007. "Hedonic Housing Price Indices: The Turinese Experience," Rivista di Politica Economica, SIPI Spa, vol. 97(6), pages 113-148, November-.
    9. Lucey, Brian M. & Devine, Liam, 2015. "Was wine a premier cru investment?," Research in International Business and Finance, Elsevier, vol. 34(C), pages 33-51.
    10. Wang, Ferdinand T. & Zorn, Peter M., 1997. "Estimating House Price Growth with Repeat Sales Data: What's the Aim of the Game?," Journal of Housing Economics, Elsevier, vol. 6(2), pages 93-118, June.
    11. James Hansen, 2006. "Australian House Prices: A Comparison of Hedonic and Repeat-sales Measures," RBA Research Discussion Papers rdp2006-03, Reserve Bank of Australia.
    12. Gilles Duranton & Jessie Handbury, 2023. "COVID and Cities, Thus Far," Economic Policy Review, Federal Reserve Bank of New York, vol. 29(2), pages 6-52, October.
    13. William Goetzmann & Liang Peng, 2001. "The Bias of the RSR Estimator and the Accuracy of Some Alternatives," Yale School of Management Working Papers ysm174, Yale School of Management, revised 01 Mar 2001.
    14. Arthur Korteweg & Roman Kräussl & Patrick Verwijmeren, 2016. "Does it Pay to Invest in Art? A Selection-Corrected Returns Perspective," The Review of Financial Studies, Society for Financial Studies, vol. 29(4), pages 1007-1038.
    15. Devaney, Steven, 2010. "Trends in office rents in the City of London: 1867-1959," Explorations in Economic History, Elsevier, vol. 47(2), pages 198-212, April.
    16. John Mondragon & Johannes F. Wieland, 2022. "Housing Demand and Remote Work," Working Paper Series 2022-11, Federal Reserve Bank of San Francisco.
    17. William Goetzmann & Liang Peng & Jacqueline Yen, 2012. "The Subprime Crisis and House Price Appreciation," The Journal of Real Estate Finance and Economics, Springer, vol. 44(1), pages 36-66, January.
    18. Elisa Guglielminetti & Michele Loberto & Giordano Zevi & Roberta Zizza, 2021. "Living on my own: the impact of the Covid-19 pandemic on housing preferences," Questioni di Economia e Finanza (Occasional Papers) 627, Bank of Italy, Economic Research and International Relations Area.
    19. Liang Peng, 2001. "A New Approach of Valuing Illiquid Asset Portfolios," Yale School of Management Working Papers ysm175, Yale School of Management, revised 01 Aug 2001.
    20. repec:ags:aaea22:335486 is not listed on IDEAS
    21. Deng, Yongheng & McMillen, Daniel P. & Sing, Tien Foo, 2014. "Matching indices for thinly-traded commercial real estate in Singapore," Regional Science and Urban Economics, Elsevier, vol. 47(C), pages 86-98.

    More about this item

    Keywords

    Rent index; Multiple listing service; Consumer price index;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:buseco:v:56:y:2021:i:4:d:10.1057_s11369-021-00241-4. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.