SSRN-House Prices and Fundamentals: 355 Years of Evidence by Brent Ambrose, Piet Eichholtz, Thies Lindenthal

As a part time landlord, I will definitely agree with this this one. I am not sure the reason, but rent prices take much longer to adjust than do real estate prices. Now we have 355 years of data (amazing btw) to back up that statement.

SSRN-House Prices and Fundamentals: 355 Years of Evidence by Brent Ambrose, Piet Eichholtz, Thies Lindenthal:

"This paper examines the long run relation between prices and rents for houses in Amsterdam from 1650 through 2005. We first demonstrate that these series are cointegrated, a necessary condition for studying movements of the rent-price ratio. We then estimate the deviation of house prices from fundamentals and find that these deviations can be persistent and long-lasting. Lastly, we look at the feedback mechanisms between housing market fundamentals and prices, and find that market correction of the mispricing occurs mainly through prices not rents. This correction back to equilibrium, however, can take decades"