Wednesday, August 31, 2005

Are Increasing Rents a Sign of a Housing Slowdown?

This New York Times piece from last week saw evidence of a slowdown in the housing market in rising rental prices:

"Rents are rising again across the country, squeezing tenants who are already coping with high gasoline prices and improving returns to landlords after a deep five-year slump.

The turnaround appears to be another sign that the boom in house prices and sales is finally slowing, as homes have become so expensive in many metropolitan areas that some people have decided to rent instead."

Link:

Rent Heads Up as Home Prices Put Off Buyers

In fairness to housing bulls, one of the arguments in favor of a bubble is that home prices are completely out-of-whack with rental prices for equivalent properties on a historical basis. Those that argue we are in a bubble say that this disconnect cannot continue and that housing prices need to fall in relation to rents. The other way that this imbalance can get corrected, of course, is for rents to rise. Thus, rising rental prices could be seen as justification for today's extravagant sales prices. That being said, the fledgling price increases reported by the Times does not come close to bringing buy-to-rent ratios back to historical averages.

4 Comments:

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Blogger PJP said...

Rent heads up but what about incomes? The fundamentals of the market will rule in the long rune regardless of this technical run up in real estate values. Stocks are a function of the dividends adn real estate is a function of the rents. The end result of all of this will be troubled credit reports and you can learn about how to fix that here...

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Blogger Pete said...

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