econintersect.com
       
  

FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.



posted on 08 November 2015

Rent Or Buy? National Price-to-Rent Ratio 5.7 Percent Below Pre-Crisis Peak.

from CoreLogic

Buying or renting a house is always a big decision for households. It's also important for millennials who, recently graduated from school, may be moving to a different city to start a career, buy a house and build a family. Just like buying stocks, no one wants to buy a house when the price is high.

Seven years after the last housing bubble bust, home prices, especially in the lower tier, have returned to pre-crisis levels. People may start to argue whether we are entering another housing bubble. A colleague of mine wrote a blog which examined overvaluation in the top markets. [1]

With home prices forecasted to increase by 5 percent in 2016 and the Federal Reserve expected to raise interest rates, is this still a good time to buy?

To answer this question, CoreLogic chose 30 Core Based Statistical Areas (CBSAs) across the country based on their Multiple Listing Service (MLS) coverage since 2005. We indexed the median home price and rent to 100 on January 2005 (Figure 1). According to CoreLogic MLS data, rent didn't drop significantly during the crisis, and it has continued to increase as home prices have increased after the crisis. The median home price reached a new peak in June 2015, 3.5 percent higher than the pre-crisis peak and 40.5 percent higher than the trough in January 2008. Rent was more stable during the crisis because a number of households lost their homes to foreclosure. But starting in 2012, rent prices began to increase, following the home price trends with lags of one to two months. As the housing market continues to heal and the number of homes for sale remains low, the rental market is likely to remain robust over the next few years.

Figure 2 shows the price-to-rent ratio from January 2005. The ratio is calculated by dividing the CoreLogic median home price by the MLS median annual rent. This measure allows us to compare home prices to rent amounts. A lower price-to-rent ratio indicates a good time to buy. In January 2012, the price-to-rent ratio dropped to 9.9, which is only 71 percent of the peak in February 2007. Figure 1 shows that home prices dropped more than rent did during the crisis. We can see that the market is still adjusting after the crisis, but interest rates can't remain low for too long. The price-to-rent ratio is up 24.5 percent from the trough and is only 11.4 percent below the peak.

Figure 3 shows the current price-to-rent ratio (as of July 2015), as well as the peak and trough levels nationally and for seven CBSAs. We can see that the national ratio is up 24.5 percent from the trough in January 2012, slowly returning to the pre-crisis level, but still 11.4 percent below the February 2007 peak. Detroit reached a new peak in July 2015, and is up 5.9 percent from the pre-crisis peak. West Palm Beach, Fla. and Cleveland, Ohio are up 80.3 percent and 58 percent from their troughs, respectively. Seattle has the smallest ratio increase, at 15.5 percent from the trough.

[1] 14 Top Markets Overvalued, Double the Number as of Q1 2015, Mark Liu, September 24, 2015

© 2015 CoreLogic, Inc. All rights reserved.

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical News Post Listing










Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, using Livefyre just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.



You can also comment using Facebook directly using he comment block below.





Econintersect Contributors


search_box

Print this page or create a PDF file of this page
Print Friendly and PDF


The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.


Take a look at what is going on inside of Econintersect.com
Main Home
Analysis Blog
Democratic Development Lowers the Cost of Credit
Is Growing Household Debt An Economic Counter-Dynamic?
News Blog
What We Read Today 27 February 2017
February 2017 Texas Manufacturing Survey Continues to Expand But Key Internals Declined
January 2017 Pending Home Sales Index Declines
PEOPLE ARE AWESOME 2017 Amazing Talented Kids Compilation
Durable Goods New Orders Improved in January 2017
China's Continuing Credit Boom
Infographic Of The Day: Ten Interview Questions That Make You Sound Dumb
Early Headlines: Asia Stocks Down, Oil Up, Dollar And Gold Steady, UK Inflation, 'Moonlight' Wins Oscar, LSE Merger May Be Off, Greek Banks, India Going Green And More
Most Read Articles Last Week Ending 25 February
How British Businesses Helped The Confederacy Fight The American Civil War
Where You Can Surf A Lot For A Little In The EU
'I Can Live With Either One': Palestine, Israel And The Two-state Solution
Where Snapchat's Users Come From
Investing Blog
The Week Ahead: Reality And Stock Prices
Snapchat Still Has Some Growing Up To Do
Opinion Blog
What Do You Call A Lie Constructed From Other Lies?
Why Winning The French Presidential Election Could Be A Poisoned Chalice
Precious Metals Blog
Deflation And Gold: A Contrarian View
Live Markets
27Feb2017 Market Close: The Trump Bull Rally Lumbers On Despite Bearish Analysts Calls For Caution, US Dollar Settles Higher, WTI Crude End Session In The Low 54 Handle
Amazon Books & More






.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government





























 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2017 Econintersect LLC - all rights reserved