Home Price versus Rent

Home prices swung too high and then crashed badly. But there was no notable fluctuation in rents. The chart below compares the two data points and clearly shows how home prices overcorrected in relation to rent from 2009 to 2011. Beginning this year, home prices steadily made positive gains, and are now catching up to the rise in rents. Given that rents are expected to further rise because of falling apartment vacancy rates, home values would need to continue upward movement in order to catch up fully to rent trends.

This simple home price-to-rent comparison does not even take into account the impact of home buying from lower interest rates. So even not factoring in generational low mortgage rates, homes remain a good buy. But please, stay well within your budget.

Lawrence Yun, PhD., Chief Economist and Senior Vice President

Lawrence Yun is Chief Economist and Senior Vice President of Research at NAR. He directs research activity for the association and regularly provides commentary on real estate market trends for its 1 million REALTOR® members.

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