The Price of Housing in the United States: Lyons, Shertzer, Gray & Agorastos (2026)

What this is. The core results, the user cost framework, and the rolling-window hedonic method with its defining equations: enough to understand what the paper found and how, without reading the full 45 pages. To replicate or extend, read the original at the DOI. The underlying data are in the Harvard Dataverse.

TL;DR

The paper constructs the first annual market rent index (RI) and housing price index (HPI) for 30 U.S. cities from 1890 to 2006, drawing on over 2.7 million archival newspaper real estate listings. The authors apply a rolling-window hedonic regression to adjust for changing housing quality and aggregate by population weight to a national series. HHP real market rents rose 60% from 1890 to 2006 and 36% from 1914 to 2006, while the BLS Rent of Primary Residence series implies a nearly 50% real decline from 1914 to 2006. Real sales prices grew 142% from 1890 to 1987, compared with 37% in the Shiller (2015) national index. The paper also revises upward the U.S. capital gain estimate of Jordà et al. (2019) (who report 1.0% AGR for housing capital gains) and provides city-level evidence extending the national long-run series of Knoll, Schularick, and Steger (2017). The average annual real total return to housing over the full period was 9%, dominated by rental income at 7.7%; capital gains contributed 1.3%, averaging 0.04% per year in 1890-1940 and 1.7% in 1940-2006. Average capital gains were positively associated with the 2006 zoning restrictiveness measure.

Core results

Magnitudes and significance are as reported in the paper. Locators point to the source PDF.

#	Result	Locator	Magnitude
R1	HHP real market rents rose 60% nationally from 1890 to 2006, contrasting with the BLS Rent of Primary Residence (RoPR) series, which implies rents fell roughly 50% from 1914 to 2006	Figure II, p.572; p.573	HHP national RI: +60% relative to 1890; +36% relative to 1914; BLS RoPR series: approximately -0.6% per year from 1914 to 2006
R2	HHP real sales prices grew 142% from 1890 to 1987, nearly four times the 37% implied by the Shiller index, and reached approximately four times the 1890 level by 2006	Figure III, p.575; p.576	HHP: +142% real growth 1890-1987 (Shiller: +37%); HHP real HPI in 2006 ~4x the 1890 level; the two series diverge mainly in 1953-1987
R3	The rent-to-price ratio fell from approximately 8-9% in 1890-1920 to 3% in 2006, consistent with the emergence of the modern long-term amortized mortgage and falling user costs	Figure VII Panel A, p.589; text pp.590-591	Rent-to-price: ~8-9% in 1890-1920; 9.4% in 1935; 7.4% in 1970; ~3% in 2006; the paper relates the decline to lower user costs and mortgage-market changes
R4	The average annual real total return to housing over 1890-2006 was 9.0%, with rental returns accounting for 7.7% and real capital gains just 1.3%; returns were negative in only 5 of 116 years	Figure VIII, p.595; pp.595-596	Total return 9.0%; rental return 7.7% (SD 1.9%, reported CV 0.2); capital gain 1.3% (SD 5.0%, CV 3.8); capital gain close to zero before 1940 (+0.04% pa)
R5	HHP capital gains averaged +0.04% pa before 1940 and +1.7% pa from 1940 to 2006, revising the Shiller long-run capital gain estimate of 0.7% upward by approximately 0.6 percentage points	pp.595-596	HHP overall capital gain AGR 1.3% vs Shiller 0.7%; the paper attributes understated Shiller price growth mainly to non-conforming-loan exclusions in 1953-1974 and appraisal data in 1975-1986
R6	Over 1890-2006, housing offered a real return of 9% vs 11.5% for equities, but with standard deviation 5.4% vs 17.6% (coefficient of variation 0.6 vs 1.5)	p.597; Figure IX, p.598	Housing: mean 9.0%, SD 5.4%, CV 0.6; equities: mean 11.5%, SD 17.6%, CV 1.5; equity capital gain ~3.6% pa vs housing 1.3% pa; housing outperformed equities only in the early 1920s, early 1940s, and late 1970s to early 1980s
R7	Average annual real capital gains were positively associated with 2006 zoning restrictiveness in both Figure VI periods; the estimated relationship was similar across periods	Figure VI, p.586; text p.585	OLS slope on zoning index: 0.63 (Figure VI panel A, 1940-1969; footnote 23 instead labels this coefficient’s period 1940-1960), 0.79 (1970-2006); the difference is not statistically significant
R8	Real national sales prices rose over the 1920s and reversed during the Great Depression	Figure IV, Panel A, p.578; text p.579	Real sales prices rose 70% over the 1920s, then fell during the 1930s
R9	Real rents peaked in 1923, then fell by almost one-third from 1925 to 1934	Figure IV, Panel A, p.578; text p.579	1923 rents were 25% above 1914 and almost 50% above 1890; real rents fell almost one-third over 1925-1934
R10	The HHP sales index aligns closely with the Shiller/Case-Shiller-Weiss series after 1987, providing a later-period validation check	Figure III, p.575; text p.576	Real price growth 1987-2006: HHP +60%; Case-Shiller-Weiss +65%
R11	Sales prices and rents diverged after 1970, with sales prices rising much faster	Figure IV, Panel C, p.580; text p.580	From 1971 to 2006, real sales prices rose 140% while rents rose 5%
R12	Housing prices shifted from lagging construction costs after World War II to outpacing them across all sample cities after 1970	Text p.581; Figure V, p.583; Online Appendix Figure D10	1945-1970 prices grew more slowly than costs in all cities except Boston and Los Angeles; 1970-2003 prices grew faster than costs in every sample city
R13	Homeownership rose substantially alongside postwar mortgage-market development	Figure VII, Panel A, p.589; text p.592	The sample-city homeownership rate rose from 40% to over 60% by 1960
R14	Housing return composition differed across the three long-run periods, as declining rental returns were replaced by rising capital gains	Text pp.596-597	1890-1935: total 8.9%, rental 8.8%, capital gain approximately 0%; 1935-1970: total 10.2%, rental 8.6%, capital gain 1.6%; 1970-2006: total 8.1%, capital gain 2.6%
R15	Mortgage terms lengthened rapidly during the shift to modern long-term amortized loans, reducing user cost	Figure VII, Panel B, p.589; text p.591	Typical years to maturity rose from 5 before the mortgage changes to 18 by 1940

Overall (paper’s conclusion). The HHP series revise several standard facts about U.S. housing markets. Over 1890-2006, HHP real rents rose 60%; unlike HHP, the BLS RoPR implies a real decline from 1914 to 2006, though the paper notes that the measure is contract rents rather than market rents. Adjustments to the BLS series by Crone, Nakamura, and Voith (2010) and Gordon and van Goethem (2007) move toward HHP’s upward correction. Real sales prices grew substantially more from 1890 to 1987 than the Shiller index records, consistent with limitations in its retrospective survey and non-conforming-loan data. Fishback and Kollmann (2014) provide census and New Deal evidence that real prices were lower in 1940 than in 1930. Over the full 116 years, housing offered a mean annual real return of 9%, driven primarily by rental income (7.7%), with capital gains (1.3%) more volatile and more important after 1940. In the cross section, average capital gains were positively associated with measured zoning restrictiveness; the paper treats this as a relationship, not a causal estimate.

Theory / model

The paper has no formal equilibrium model. It applies two accounting frameworks to interpret the HHP data.

User cost of housing (Section VI, p.587). The no-arbitrage condition equating annual rent $R_t$ to the user cost of owning one unit of housing at price $P_t$ is (equations 4 and 5):

$$R_t = P_t \, u_t, \tag{4}$$ $$u_t = i_t + \tau_t + \delta_t - g_{t+1} + \gamma_t, \tag{5}$$

where $i_t$ is the real risk-free interest rate, $\tau_t$ the tax benefit or cost associated with homeownership, $\delta_t$ maintenance costs, $g_{t+1}$ expected appreciation over the coming year, and $\gamma_t$ the risk premium for owning relative to renting. The user cost framework motivates the rent-to-price ratio series (R3) and is used to interpret the three-phase narrative of mortgage market development (Section VI).

Housing production cost identity (Section V, p.581). Following Glaeser and Gyourko (2018), the production cost of housing in period $t$ is

$$\text{PC}_t = (L_t + \text{CC}_t) \times \text{EP}_t, \tag{3}$$

where $L_t$ is land cost, $\text{CC}_t$ construction costs, and $\text{EP}_t$ entrepreneurial profit. The paper focuses on $\text{CC}_t$ using RSMeans indices; land value estimation is deferred to future work.

Total return to housing (Section VII, pp.593-594). For city $c$ in year $t$, equation (6) defines total nominal return as capital gain plus rental return (p.593):

$$R_{c,t} = H_{c,t} + Y_{c,t}. \tag{6}$$

Equation (7) defines the two components from the baseline HPI and RI series (p.593):

$$R_{c,t} = \frac{\text{HPI}_{c,t} - \text{HPI}_{c,t-1}}{\text{HPI}_{c,t-1}} + \frac{\text{RI}_{c,t}}{\text{HPI}_{c,t-1}}. \tag{7}$$

The paper defines CPI inflation as $\pi_t = (\text{CPI}_t - \text{CPI}_{t-1})/\text{CPI}_{t-1}$ and real capital gain as $h_{c,t} = (1 + H_{c,t})/(1 + \pi_t) - 1$ (Section VII, p.594). Equation (8) gives the arithmetic mean capital gain over $T = \{1891, \ldots, 2006\}$ (p.594):

$$\bar{h}_c = \frac{1}{|T|} \sum_{t=1891}^{2006} h_{c,t}. \tag{8}$$

Method

The core method is a hedonic rolling-window (RW) regression, following the approach formalized by Silver (2016), implemented here for the first time at city scale over a century-long horizon. The authors estimate separate hedonic OLS regressions by city and rolling window, avoiding fixed quality coefficients across the full sample.

Rolling-window hedonic regression (Section III, p.568). For a rolling window of size $s$ with base year $b$, and city $c$, the estimating equation is (equation 1):

$$\ln(\text{price})_{ict} = \alpha_{bc} + \sum_{y=b+1}^{b+s-1} \beta_{cy} \cdot \mathbf{1}_{\{y=t\}} + \mathbf{X}_{ict} \boldsymbol{\Gamma}_{bc} + \varepsilon_{ict}, \tag{1}$$

where the regression uses only observations $i$ from years $t \in \{b, \ldots, b+s-1\}$, $\beta_{cy}$ captures the log price change from year $y$ to $y+1$ for city $c$, $\mathbf{1}_{\{y=t\}}$ is an indicator for year $t$, and $\mathbf{X}_{ict}$ is a vector of property characteristics. The baseline is $s = 2$ (two-year windows), giving one $\beta$ per window. Allowing coefficients $\boldsymbol{\Gamma}_{bc}$ to vary by window means the relative price of a bathroom or an extra room can change over time, addressing unobserved quality drift that a single pooled regression cannot accommodate.

Chain-linking. The city-level index at time $t$ is the product of all preceding window-specific price changes (equation 2, p.569):

$$\iota_{ct} = \prod_{y=1891}^{t} \exp(\beta_{cy}). \tag{2}$$

National aggregation. The national index aggregates city-level percentage changes each year using the city’s population share as a weight (effectively a Paasche price index). Population counts come from U.S. Census metropolitan area data, interpolated between census years.

Robustness variants include three-year and five-year rolling windows; results are qualitatively similar with the main difference in the wartime rental segment (1944-1947), where the two-year specification with rent-control adjustments is preferred.

Empirical specifications

HHP rent and sales price indices (Sections II-IV). Each city-window regression (equation 1) is estimated on the cross-section of newspaper listings for that city in the relevant two-year window. Controls in $\mathbf{X}_{ict}$:

• Location: 20 standardized geographic areas per city, defined by machine-learning geocoding of address or intersection information; allowed to expand as the metro area grows over time.
• Size: Dummies for total rooms (or bedrooms post-WWII) and bathrooms (rounded to nearest half); stories; missing-size indicators included.
• Type: House vs. apartment indicator.
• Rental frequency (rents only): Rental payment period dummies (weekly/monthly/annual), with frequency imputed for approximately 33,000 listings without a stated period using city-year percentile comparisons.

When the two-year window yields too few listings in a city-year (mainly rental listings during WWII and sales during the Great Depression), the window length is extended to three or five years; cases are documented in Online Appendix Table B2. These are separate OLS regressions by city and rolling window, with a window-specific intercept, year indicators, and property-characteristic controls rather than pooled city fixed effects. The estimating sample is more than 2.7 million listings across 30 cities, 1890-2006; the paper does not state a standard-error adjustment for this index-construction step (equation 1, pp.568-569).

Cross-city zoning relationship (Section V). For each of two periods, the paper plots city-level average annual real capital gain against the 2006 Saiz/Wharton zoning index and reports a simple OLS slope (text pp.585-586; Figure VI, p.586):

$$\overline{g}^{HPI}_{c,p} = \alpha_p + \beta_p \, \text{WRLURI}_c + \varepsilon_{c,p}, \qquad p \in \{1940\text{-}1969, 1970\text{-}2006\}.$$

The cross-section contains the HHP sample cities (30 cities); there are no other regressors or fixed effects in the stated simple regression. The main text gives slopes 0.63 and 0.79 and says their difference is not statistically significant, but does not specify a standard-error estimator. Figure VI labels the first panel 1940-1969, while footnote 23 gives 1940-1960 as the period for the 0.63 coefficient.

Rent-to-price ratio (Section VI). The ratio is constructed from the national HPI and RI series, benchmarked to a 2006 value of 3.16% taken from the Davis land-price indicators dataset. The user cost decomposition (equation 5) is used descriptively: real mortgage interest rates from Drehmann, Juselius, and Quincy (2024) and loan-to-value ratios from Fetter (2013) and the Historical Statistics of the United States are plotted against the ratio to identify the three credit-condition phases (1890-1935; 1935-1970; 1970-2006).

Total return decomposition (Section VII). For each city and year, the real capital gain and rental return are computed from the baseline HPI and RI indices and the Officer-Williamson CPI. National returns are population-weighted arithmetic means. The volatility comparison uses Shiller (1992) S&P 500 earnings and price data from Robert Shiller’s website for equities.

Housing supply and zoning (Sections V-VI, R7). Figure VI plots city-level average annual real capital gains (from HHP HPI) over 1940-1969 and 1970-2006 against the Saiz (2010) zoning restrictiveness measure (Wharton Residential Urban Land Regulation Index from Gyourko, Saiz, and Summers 2008). The text reports coefficients of 0.63 and 0.79 respectively and says the difference is not statistically significant; footnote 23 labels the first coefficient’s period 1940-1960, whereas Figure VI labels its panel 1940-1969.

Datasets used

Dataset	Role in paper	Wiki page
HHP Newspaper Real Estate Listings	Primary source: 2.7 million archival newspaper listings for 30 U.S. cities, 1890-2006; supports rent and sales price index construction	No page (hand-collected; data in Harvard Dataverse)
BLS Rent of Primary Residence (RoPR / CUUR0000SEHA)	Benchmark comparison for the rental price series (Sections III-IV)	FRED
Shiller national housing price index (Yale website)	Benchmark comparison for the sales price series (Sections III-IV, VII)	No page yet
FHFA House Price Index	City-level benchmark for sales prices from 1975 onward (Online Appendix)	No page yet
RSMeans construction cost index	City-level construction cost series (five-year intervals 1940-1980; annual thereafter) used in housing supply analysis (Section V)	No page yet
BLS city building permit surveys (1920-1950) and Census Bureau Building Permit Survey (1959-2006)	Population-adjusted housing permit series for supply analysis (Section V)	No page yet
Officer-Williamson extended CPI	Deflating all nominal series to real terms	No page yet
Wharton Residential Urban Land Regulation Index (WRLURI)	City-level zoning stringency from Gyourko, Saiz, and Summers (2008) / Saiz (2010); used in zoning and capital gains analysis (Section V)	No page yet
Drehmann, Juselius, and Quincy (2024) mortgage data	Real mortgage interest rates and loan-to-value ratios for the user cost analysis (Section VI)	No page yet

Sample scope: 30 U.S. cities from 1890 to 2006 (annual frequency). Most cities enter in 1890; Las Vegas enters later. Approximately 1.23 million rental listings and 1.47 million sales listings.

When to read the full paper

Read the source at the original DOI if you are: constructing city-level housing models and need the annual HPI or RI series (available in Harvard Dataverse); examining the history of U.S. housing returns over the twentieth century; studying the relationship between mortgage market development and asset pricing; or investigating whether the standard Shiller index understates historical housing price growth for a specific period or city. The locators above point to the exact figures and tables.

Attribution and rights

Source: peer-reviewed, The Quarterly Journal of Economics (2026), 559-603. Advance Access published October 10, 2025. This distillation was extracted by an LLM on 2026-06-28 and is not human-verified or independently reproduced. The paper is paywalled; redistribution is extract-only.

Lyons, Ronan C., Allison Shertzer, Rowena Gray, and David Agorastos. “The Price of Housing in the United States, 1890-2006.” The Quarterly Journal of Economics (2026), 559-603. DOI: 10.1093/qje/qjaf047. © The Author(s) 2025. Published by Oxford University Press on behalf of Harvard University. All rights reserved. This page is an extract by the Institute for Automated Research.