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Rent-to-price ratio

Posted by Chris Farrell on Wednesday, February 25, 2009

Rent and ownership are competing markets. Looking at the rent to price ratio is a quick way of judging whether homes are overvalued or not. Calculated Risk ran the numbers off the latest Case-Shiller national home price data.

It looks like prices still have a ways to fall, although perhaps not much more. The wild card is that rental prices are alos coming down in a lot of markets, which will put additional downward pressure on home prices.

Comments (2)

bsimon | Respond
February 25, 2009 11:12 AM

My crude calculations say there are buying opportunities in this market for people who want to get into the real estate business in Minneapolis. Certainly in my neighborhood it seems like rents (based on craigslist listings) are at the point where they will more than cover expenses (based on list prices).

mschris | Respond
March 4, 2009 8:00 PM

As a first time home buyer, what criteria should I use in order to figure out what would be a good offer on a home? Would it be useful to do a market evaluation on home prices from a certain year before the bubble? If so, which year? 2000 - when the rent-to-price ratio was near 1.1?

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