Some information on the relative valuations of residential and other private assets using Bureau of Economic Analysis fixed assets data

Kitchen, John (2008): Some information on the relative valuations of residential and other private assets using Bureau of Economic Analysis fixed assets data.

Abstract

This paper presents information on the relative valuation of fixed assets, using data from the Bureau of Economic Analysis (BEA) coupled with observed longer-run historical relationships and “stylized facts” for macroeconomic relationships in the U.S. economy. Alternative scenarios are examined describing the likely extent of overvaluation of residential assets and the combination of real investment and price changes that would be required to resolve the overvaluation under varying assumptions. The scenarios presented illustrate how changes to the total nominal valuation of the asset stock typically are more easily accomplished through changes to the price of the asset than from changes in real investment flows, and this is particularly true for residential assets with their low depreciation rate. The approach provides a useful framework for the evaluation of alternative future paths and the scenarios presented provide useful benchmarks against which alternative combinations of changes in real investment and prices can be compared.

• Item Type: MPRA Paper
• Language: English
• Keywords: residential investment; asset valuation; housing price
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E30 - General; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E22 - Investment ; Capital ; Intangible Capital ; Capacity

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