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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: GraceZ who wrote (16036)1/15/2004 12:56:59 PM
From: gpowellRead Replies (1) of 306849
 
The expected return can be figured based on the historical rate of return and the fact that any rational investor would expect a regression to the mean

Rent is determined by current supply and demand, while home prices are in part determined by investment potetential, or future supply and demand. Home prices may be quicker to adjust to shifts in rational expectations while rents only adjust when these expectations are realized. The spread simply reflects preferences and constraints under equilibrium conditions and cannot be used to determine value, except under equilibrium.
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