Real House Prices, Price-to-Rent Ratio and Price-to-Median Income in December and a look at “Affordability”

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Today, in the Calculated Risk Real Estate Newsletter: Real House Prices, Price-to-Rent Ratio and Price-to-Median Income in December

Excerpt:

In October 2004, Fed economist John Krainer and researcher Chishen Wei wrote a Fed letter on price to rent ratios: House Prices and Fundamental Value. Kainer and Wei presented a price-to-rent ratio using the OFHEO house price index and the Owners’ Equivalent Rent (OER) from the BLS.

Note that OER is lagging behind other measures of recent rent increases.

Case-Shiller MoM House Prices
Here is a similar graph using the Case-Shiller National and Composite 20 House Price Indexes. This graph shows the price to rent ratio (January 2000 = 1.0). The price-to-rent ratio had been moving more sideways but picked up significantly recently.On a price-to-rent basis, the Case-Shiller National index is at a record high, and the Composite 20 index is back to June 2005 levels.

By all of the above measures, house prices appear elevated.
emphasis added

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