The 2000s and the 2020s both saw housing price booms, but rents only skyrocketed during the most recent spike. Why were things different this time?

Federal Reserve Bank of Boston senior economist Paul Willen answers that question in the latest episode of Six Hundred Atlantic. In the interview, Willen discusses the distinct drivers behind the housing and rental markets, why they matter, and more from the recent paper he co-authored, “House Prices and Rents in the 21st Century.”

Willen says housing is often seen as an investment. So, its prices can move like stock prices and are influenced by variables including interest rates. Rents are driven more by things that affect housing as a place to live, such as local demographics or population growth. During the latest boom, both housing and rents went up at the same time.

“What we infer from that is that this was an increase not in housing as an investment, but … as a place to live,” he said.

In the interview, Willen talks about challenges consumers face when prices rise simultaneously in both markets. He also discusses surprises in the data and highlights some unanswered questions about the changing housing market and the evolution of cities.

Listen to the episode above, or on the episode page.