Returns on U.S. Residential Real Estate

Personal residences represent the largest asset class allocation for many U.S. investors. What return do they generate, how do their returns relate to stock market returns and how do they vary across Metropolitan Statistical Areas (MSA)? In their January 2019 paper entitled “The Cross-Section of Expected Housing Returns”, Esther Eiling, Erasmo Giambona, Ricardo Lopez Aliouchkin and Patrick Tuijp examine how U.S. residential real estate returns vary across MSAs. They also examine relationships between MSA residential real estate returns and both U.S. stock market returns and overall U.S. residential real estate returns. Using monthly Zillow Home Value Index levels for 571 MSAs, zip code population data from the U.S. Census Bureau and U.S. stock market returns during April 1996 through December 2016, they find that:

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