BH&J National Price-To-Rent Ratios Monthly Report
The price-to-rent ratio is calculated as local home prices to annualized rents. The ratio does not speak to housing affordability and, in general, is not comparable across different markets as cost of living, production, and incomes can vary dramatically. It is generally accepted that higher price-to-rent ratios favor renting as they indicate renting is less expensive than ownership. Conversely, lower price-to-rent ratios favor ownership.
Our monthly report extends this benchmark measure by comparing changes in the ratio across time and local market historic averages for the largest housing markets in the U.S.
In this context, it is the change in the price-to-rent ratio through time relative to the local market’s historic average that matters. Ratios above the historic average suggest renting is generally preferred, while ratios below the historic average suggest a preference for ownership. Additionally, the distance between price-to-rent scores and the local average also matters. The greater the distance above an area’s average price-to-rent ratio, the more that market favors renting. The greater the distance below an area’s average price-to-rent ratio, the more that market favors ownership.
The goal of this monthly report is to assist in more informed decision making as families across the country make their latest housing decisions. The Top 100 U.S. Housing Markets and the Waller, Weeks, and Johnson Rental Index are also helpful resources..