Owners Equivalent Rent and Price to Rent

Here’s an interesting graph from Calculated Risk. As you can see the price-to-rent ratio is approaching some average, which is encouraging. However, it’s the last line of the posting that is key:

With rents still falling, the OER index will probably continue to decline – pushing up the price-to-rent ratio.

Falling rents will continue to push this ratio higher for a while still, and will put pressure on real estate prices, the CPI (OER comprises roughly 40% of the index), and the wealth effect.

For the full post, click here.

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