Real Estate and Rental Markets During Covid Times

56 Pages Posted: 19 May 2021 Last revised: 2 Aug 2022

See all articles by Eleni Iliopulos

Eleni Iliopulos

Université d'Évry - Centre D'Etudes des Politiques Economiques et de L'Emploi (EPEE)

Bertrand Achou

HEC Montreal - Retirement and Savings Institute

Hippolyte d'Albis

Paris School of Economics (PSE)

Abstract

In this work we introduce a general equilibrium model with landlords, indebted owner-occupiers and renters to study housing markets' dynamics. We estimate it by using standard Bayesian methods and match the US data of the last decades. This framework is particularly suited to explain current trends on housing markets. We highlight the crucial relationship between interest rates, house prices and rents, and argue that it helps understanding the main driving forces. Our analysis suggests that current developments on housing markets can play a role for a recovery from the Covid pandemic as they have an expansionary effect on aggregate output. Moreover, we account for the heterogeneous impact of crisis-induced policies depending on agents' status on the housing market. We show how, despite an increase in housing prices, the welfare of landlords has been negatively hit. This is associated to the joint decrease in returns on housing and financial assets that reduces their financial incomes.

Keywords: Housing, Rental Markets, Collateral Constraints, Financial Frictions, HANK Models.

Suggested Citation

Iliopulos, Eleni and Achou, Bertrand and d'Albis, Hippolyte, Real Estate and Rental Markets During Covid Times. Available at SSRN: https://ssrn.com/abstract=3849199

Eleni Iliopulos (Contact Author)

Université d'Évry - Centre D'Etudes des Politiques Economiques et de L'Emploi (EPEE) ( email )

Boulevard Francois Mitterrand
F-91025 Evry Cedex
France

Bertrand Achou

HEC Montreal - Retirement and Savings Institute ( email )

United States

Hippolyte D'Albis

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

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