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Can the BH&J Buy vs. Rent Index Anticipate Housing Price Movements?

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  • Ken H. Johnson
  • Eli Beracha
  • Wei Feng

Abstract

This paper investigates whether and to what extent the Beracha, Hardin, and Johnson Buy vs. Rent Index (BH&J Index) is able to anticipate future housing price movements. The BH&J Index is based on a model introduced by Beracha and Johnson (2012) in which a low index value is associated with a buy recommendation and a high index value is associated with a rent recommendation. The results of our analysis reveal a negative relation between the BH&J Index value and future housing price changes at the metropolitan level, which is consistent with the buy or rent recommendation of the index. The negative relation between the BH&J Index value and future housing price changes is statistically significant, economically meaningful, and is particularly relevant for medium-term holding periods.

Suggested Citation

  • Ken H. Johnson & Eli Beracha & Wei Feng, 2020. "Can the BH&J Buy vs. Rent Index Anticipate Housing Price Movements?," Journal of Housing Research, Taylor & Francis Journals, vol. 29(1), pages 20-33, October.
    • Handle: RePEc:taf:rjrhxx:v:29:y:2020:i:1:p:20-33
    DOI: 10.1080/10527001.2020.1831827
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