The Changing Prospects for Building Home Equity: An Updated Analysis of Rents and the Price of Housing in 100 Metropolitan Areas

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October 2008, Hye Jin Rho, Danilo Pelletiere, and Dean Baker

This report updates CEPR's May 2008 report titled "Ownership, Rental Costs and the Prospects of Building Home Equity: An Analysis of 100 Metropolitan Areas," which compared the ownership and rental costs in 100 major U.S. metropolitan areas and projected the potential for a first-time homebuyer in those cities to accumulate home equity.  Since the publication of that paper, housing prices have continued their steep descent in much of the country and rents have risen modestly.  The study shows that recent price declines indicate many communities are moving back toward the historical track of modest equity increases for homebuyers. The findings point out that is still unwise for policy makers to attempt to directly intervene in housing markets to maintain what are historically unprecedented high home prices.

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