This paper employs a simple intertemporal model to show that presence of liquidity constraints can depress the price of a durable good below its net present rental value, regardless of the overall supply elasticity. The existence of price effects implies that the relaxation of liquidity...

Housing markets experience substantial price volatility, short term price change momentum and mean reversion of prices over the long run. Together these features, particularly at their most extreme, produce the classic shape of an asset bubble. In this paper, we review the stylized facts of...

In the U.S. economy over the past twenty five years, house prices exhibit fluctuations considerably larger than house rents and these large fluctuations tend to move together with business cycles. We build a simple theoretical model to characterize these observations by showing the tight...