A friend just forwarded me the link for a recent article published at the University of Wisconsin-Madison with the title "The Rent-Price Ratio for the Aggregate Stock of Owner-Occupied Housing".
The main conclusion of the study is that rents for the 35 years from 1960 to 1995 were on average 5% to 5,5% of house prices. However in 1996 house prices started raising much faster than rents.
They predict that for the rent/price ratio to return to the historical average home prices would have to fall 15% in the next five years assuming rents would increase 4% per year during this period. For the balance to be reached faster home prices would have to drop more.
Interesting read and more on fact based than the usual articles. Food for thought. :coffee:
Text @ http://morris.marginalq.com/DLM_fullpaper.pdf
The main conclusion of the study is that rents for the 35 years from 1960 to 1995 were on average 5% to 5,5% of house prices. However in 1996 house prices started raising much faster than rents.
They predict that for the rent/price ratio to return to the historical average home prices would have to fall 15% in the next five years assuming rents would increase 4% per year during this period. For the balance to be reached faster home prices would have to drop more.
Interesting read and more on fact based than the usual articles. Food for thought. :coffee:
Text @ http://morris.marginalq.com/DLM_fullpaper.pdf
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