We apply the dynamic Gordon growth model to the housing market in 23 US metropolitan areas, the four Census regions, and the nation from 1975 to 2007. The model allows the rent-price ratio at each date to be split into the expected present discounted values of rent growth, real interest rates,...

We use the dynamic Gordon-growth model to decompose the rent-price ratio for owner-occupied housing in the U.S., four Census regions, and twenty-three metropolitan areas into three components: The expected present value of real rental growth, real interest rates, and future housing premia. We...