Equilibrium between interest payments and income in the housing market

Equilibrium between interest payments and income in the housing market

De Vries, P.
Boelhouwer, P.J.

OTB Research Institute

2009-12-31

The literature on housing markets suggests that house prices in almost all western economies can be explained by short-run demand-oriented variables and a long- run term. The basic principles of the theory are that the short-run fluctuations, which are based on recent price developments (shocks), occur due to market imperfection, while over the long term, causality with such fundamentals as income will recover. Nonetheless, many of the interesting questions in housing economics concern adjustments toward equilibrium. This paper seeks to identify a long-run equilibrium between interest payments and household income (interest-to-income ratio) instead of between house prices and income (price-to-income ratio).

House prices
Interest payments
Error-correction model
Housing market equilibrium
Household income
The Netherlands

http://resolver.tudelft.nl/uuid:63710b7a-7753-4fbb-ab19-d23b4eaab8f3

1566-4910

Journal of housing and the built environment 24(1), 19-29. (2009)

Institutional Repository

journal article

(c) 2009 de Vries, P. ;Boelhouwer, P.J.