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
Joan Robinson’s Critique of Marginal Utility Theory
The Truth About Trade Agreements - and Why We Need Them
News Blog
How To Stop Using Filler Words Like Um And Uh
02 December 2016: ECRI's WLI Growth Index Improvement Continues
Preliminary December 2016 Michigan Consumer Sentiment Highest Since Early 2015
October 2016 Wholesale Sales Improved
Rail Week Ending 03 December 2016: Finally A Positive Month
November 2016 CBO Monthly Budget Review: Total Receipts Up by 1 Percent in the First Two Months of Fiscal Year 2017
Infographic Of The Day: Copyright - Illegal Download
Early Headlines: Asia Stocks Mixed, Oil Steady, Bank Mafia, Trump To Remain TV Producer, US Life Expectancy Down, India Stocks Suffering, Park Impeached, China Struggles To Support Yuan And More
Heavy Metal And Hard Rock Albums That Went Certified Diamond Status
Down The Drain: Wastewater With The Most Cocaine
Apple's App Store Set For 5 Million Apps By 2020
How Can The UK Government Meet Its Legal Air Pollution Targets?
Most Gun Deaths In The United States Have A Tragic Motive
Investing Blog
Are Your Trade Entries Patient Enough?
Investing.com Technical Summary 08 December 2016
Opinion Blog
Looking At Everything: Trump's $1 Trillion Infrastructure Plan
The Global Financial Mess Is Due To Political Failure
Precious Metals Blog
Silver Prices Rebounded Today: Where They Are Headed
Live Markets
09Dec2016 Market Update: New Highs, New Correction Concerns Loom, Short-term Indicators Remain Bullish
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



Crowdfunding ....






























 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 - 2016 Econintersect LLC - all rights reserved