The Repeat Rent Index

40 Pages Posted: 17 Feb 2013 Last revised: 13 Sep 2015

See all articles by Brent W. Ambrose

Brent W. Ambrose

Pennsylvania State University

N. Edward Coulson

Pennsylvania State University, College of the Liberal Arts - Department of Economic; National Bureau of Economic Research (NBER)

Jiro Yoshida

Pennsylvania State University - Smeal College of Business; The University of Tokyo - Graduate School of Economics

Date Written: March 17, 2014

Abstract

Studies of real estate markets have long been hamstrung by the lack of reliable information on the flow price of housing. In contrast to the voluminous information on constant-quality real estate sale prices (from e.g. the Federal Housing Finance Administration) comparable quarterly indexes for rents have not been available. The only widely available data comes from the Bureau of Labor Statistics (BLS), who compile survey data and construct rental indexes for the nation, the census regions, and for a limited number of metropolitan areas. This research improves upon these BLS indexes in three importnat ways. First, we eschew surveys of existing renters in favor of using only newly-signed lease contracts. Second, we employ a weighted repeat rent estimator, that replicates for the rental market, as closely as possible, the weighted repeat sales estimator of Calhoun (1996), following Case and Shiller (1989) and Bailey, Muth, and Nourse (1962). Third, we construct quarterly indexes for a larger number of cities than are available for the BLS, thus expanding the profession’s ability to make cross-sectional comparisons of housing markets, particularly in conjunction with FHA data. We provide explicit comparisons between our repeat rent index and the BLS index for 11 metropolitan areas.

Our general conclusions are that (a) there is considerable heterogeneity in the behavior of rents across cities over the 2000-2010 decade, but the number of cities and years for which nominal rents fell is substantial; (b) rents fell more, or rose more slowly, over the decade than would be inferred from the BLS data. In particular we find that rents fell in many cities following the onset of the housing crisis in 2007. This is not usually observed in the BLS data; (c) repeat rent indexes (RRI) are more volatile than the BLS indexes; (d) the BLS lags the repeat rent index by 2-4 quarters. The last two conclusions follow directly from the differences in sampling methods and index construction.

Keywords: Residential Leases, Repeat Sales Index, Housing

JEL Classification: G2

Suggested Citation

Ambrose, Brent W. and Coulson, N. Edward and Yoshida, Jiro, The Repeat Rent Index (March 17, 2014). Review of Economics and Statistics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2218814 or http://dx.doi.org/10.2139/ssrn.2218814

Brent W. Ambrose (Contact Author)

Pennsylvania State University ( email )

University Park, PA 16802-3306
United States
814-867-0066 (Phone)
814-865-6284 (Fax)

N. Edward Coulson

Pennsylvania State University, College of the Liberal Arts - Department of Economic ( email )

524 Kern Graduate Building
University Park, PA 16802-3306
United States
814-863-0625 (Phone)
814-863-4775 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jiro Yoshida

Pennsylvania State University - Smeal College of Business ( email )

368 Business Building
Smeal College of Business
University Park, PA 16802
United States
814-865-0392 (Phone)
814-865-6284 (Fax)

HOME PAGE: http://www.personal.psu.edu/juy18

The University of Tokyo - Graduate School of Economics ( email )

7-3-1 Hongo
Bunkyo-ku, Tokyo 113-0033
Japan
813-5841-5653 (Phone)
813-5841-5521 (Fax)

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