Some more cheery thoughts from David Rosenberg this morning, this time on the subject of price-to-rent ratios, and what the numbers mean about home prices.
As Chart 1 shows, the collapse in housing values has yet to fully mean revert
towards rental rates. To do so would imply another 10-15% decline in
residential real estate prices, which we view as a major cloud over the 2010
economic outlook (the same holds true on a home price-to-wage basis). A
decline of that magnitude would take the number of households who are under
water on their mortgage from 15 million (25% of the mortgage population) to 30
million (half).
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See Also:
- The New American Dream: Default On Your Mortgage, Then Rent
- Apartment Rents "Plunge" in the West
- Case-Shiller: Housing Recovery Still Weak, October Decline Of 7.3% Slightly Worse Than Forecast