What drives condo prices : the rental or single family housing market?

This paper seeks to answer a question that real estate developers have wrestled with for years: apartment or condo? Given that the two types of residential units typically occupy similar buildings and structures, the goal of this research is to determine if condo prices follow rents. If a correlation is found it could have significant impact on the development of residential housing. To answer these questions historical housing prices from 1996 to 2012 for 44 of the largest metropolitan statistical areas in the U.S. will be studied. Linear regression analysis will be utilized at the metro level to understand how condo prices are influenced by apartment rents, single family home prices, the housing price index (HPI) and the yield on the 10-year U.S. treasury. The results of the analysis tell us that condo prices have followed and acted very much like single family home prices during the last 16 years. The easy credit and cheap lending that was available during the housing boom separated the single family and condo markets from the rental market by turning renters into owners. During this time rental prices remained relatively flat whereas condo and single family prices moved together and were correspondingly hit harder as a result of the financial crisis. The main implication of these findings is that it appears the type of tenure associated with a housing product has a measurable effect on the price. The physical similarity between condominium units and apartment units in large metropolitan markets does not necessarily signal a relationship in price and thus, apartment rents typically do not represent the present discounted value of condo prices.

Department dc:contributor.department

Massachusetts Institute of Technology. Center for Real Estate. Program in Real Estate Development.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2013

Author dc:creator

• Hughes, James D. (James Desmond)

Advisor dc:contributor.advisor

• William C. Wheaton.

• Center for Real Estate. Program in Real Estate Development.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/84175

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/84175