Risk and Return within the Single-Family Housing Market

Posted: 28 Jan 1999

See all articles by Theodore M. Crone

Theodore M. Crone

Swarthmore College

Richard Voith

Econsult Corporation; University of Pennsylvania - Wharton School, Department of Real Estate

Abstract

The trade-off between risk and return in equity markets is well established. This paper examines the existence of the same trade-off in the single-family housing market. That market is dominated by homeowners, who constitute about two-thirds of U.S. households. For them the choice about how much housing and what house to buy is a joint consumption/investment decision. Furthermore, owner-occupied housing is by nature a lumpy investment whose risk cannot be completely diversified. Does this consumption/investment link negate the risk/return trade-off within the single-family housing market? Theory suggests the link still holds. This paper supplies empirical evidence in support of that theoretical result.

JEL Classification: G12, R39

Suggested Citation

Crone, Theodore M. and Voith, Richard, Risk and Return within the Single-Family Housing Market. Real Estate Economics, Vol. 27, No. 1, 1999, Available at SSRN: https://ssrn.com/abstract=145358

Theodore M. Crone (Contact Author)

Swarthmore College ( email )

500 College Ave
Swarthmore, PA 19081
United States

Richard Voith

Econsult Corporation ( email )

Philadelphia, PA 19104
United States

University of Pennsylvania - Wharton School, Department of Real Estate ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States
215 382 1894 (Phone)

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