Historic House Price vs. Rent Ratio

[not-so-average-joe]

@Itokuda

Very interesting chart. Could you give us more details on which index you used for the rent? As someone pointed out above, the page has too much information.

@bugs

I don’t really see the point of 50 years vs 100 years. Who knows whether today makes the start of a new 50 year?

[ltokuda]

To get the rent data, here’s a more direct link:

http://data.bls.gov/PDQ/outside.jsp?survey=cu

You’ll be required to select some option to get the right data. Its a 4 step process.

Step 1: Select “U.S. city average”

Step 2: Scroll down and select “Rent of primary residence”

Step 3: Select “Not Seasonally Adjusted”. Don’t select “Seasonally Adjusted”

Step 4: Click on “Get Data”

Note: If your internet browser has a pop-up blocker enabled, you should disable that.

[ltokuda]

To get the rent data, here’s a more direct link:

http://data.bls.gov/PDQ/outside.jsp?survey=cu

You’ll be required to select some option to get the right data. Its a 4 step process.

Step 1: Select “U.S. city average”

Step 2: Scroll down and select “Rent of primary residence”

Step 3: Select “Not Seasonally Adjusted”. Don’t select “Seasonally Adjusted”

Step 4: Click on “Get Data”

Note: If your internet browser has a pop-up blocker enabled, you should disable that.

[ltokuda]

To get the rent data, here’s a more direct link:

http://data.bls.gov/PDQ/outside.jsp?survey=cu

You’ll be required to select some option to get the right data. Its a 4 step process.

Step 1: Select “U.S. city average”

Step 2: Scroll down and select “Rent of primary residence”

Step 3: Select “Not Seasonally Adjusted”. Don’t select “Seasonally Adjusted”

Step 4: Click on “Get Data”

Note: If your internet browser has a pop-up blocker enabled, you should disable that.

[ltokuda]

To get the rent data, here’s a more direct link:

http://data.bls.gov/PDQ/outside.jsp?survey=cu

You’ll be required to select some option to get the right data. Its a 4 step process.

Step 1: Select “U.S. city average”

Step 2: Scroll down and select “Rent of primary residence”

Step 3: Select “Not Seasonally Adjusted”. Don’t select “Seasonally Adjusted”

Step 4: Click on “Get Data”

Note: If your internet browser has a pop-up blocker enabled, you should disable that.

[ltokuda]

To get the rent data, here’s a more direct link:

http://data.bls.gov/PDQ/outside.jsp?survey=cu

You’ll be required to select some option to get the right data. Its a 4 step process.

Step 1: Select “U.S. city average”

Step 2: Scroll down and select “Rent of primary residence”

Step 3: Select “Not Seasonally Adjusted”. Don’t select “Seasonally Adjusted”

Step 4: Click on “Get Data”

Note: If your internet browser has a pop-up blocker enabled, you should disable that.

[Bugs]

The trendline made a big jump in the late 1940s; most economists attribute this to the postwar boom and the rise of the subdivision. There was another increase in the mid-late 1970s as a result of the changes in the tax laws.

As for why break it down to the 50-year cycle, one look at the charts should be sufficient to see that there was one trendline prior to WWII and a separate and much higher trendline starting in 1950. You could say the baby boom really did trigger that different trendline. Bear in mind, prior to this suburbia as such didn’t exist.

Excluding this last spike the 50-year trendline is reasonable consistent; adding in the pre-WWII trendline only confuses things.

Now if one of the bulls can argue what seismic change in our society – comparable to the effects of the baby boom – has basically tripled the rent/price ratios from 1997-2006 then I’m all ears. Absent fundamental indicators to the contrary, and as supported by the recent pricing trends that support the return-to-trendline direction in pricing – I’m of the personal opinion that our pricing structure is going to go all the way and will probably overcorrect some before it stabilizes.

[Bugs]

The trendline made a big jump in the late 1940s; most economists attribute this to the postwar boom and the rise of the subdivision. There was another increase in the mid-late 1970s as a result of the changes in the tax laws.

As for why break it down to the 50-year cycle, one look at the charts should be sufficient to see that there was one trendline prior to WWII and a separate and much higher trendline starting in 1950. You could say the baby boom really did trigger that different trendline. Bear in mind, prior to this suburbia as such didn’t exist.

Excluding this last spike the 50-year trendline is reasonable consistent; adding in the pre-WWII trendline only confuses things.

Now if one of the bulls can argue what seismic change in our society – comparable to the effects of the baby boom – has basically tripled the rent/price ratios from 1997-2006 then I’m all ears. Absent fundamental indicators to the contrary, and as supported by the recent pricing trends that support the return-to-trendline direction in pricing – I’m of the personal opinion that our pricing structure is going to go all the way and will probably overcorrect some before it stabilizes.

[Bugs]

The trendline made a big jump in the late 1940s; most economists attribute this to the postwar boom and the rise of the subdivision. There was another increase in the mid-late 1970s as a result of the changes in the tax laws.

As for why break it down to the 50-year cycle, one look at the charts should be sufficient to see that there was one trendline prior to WWII and a separate and much higher trendline starting in 1950. You could say the baby boom really did trigger that different trendline. Bear in mind, prior to this suburbia as such didn’t exist.

Excluding this last spike the 50-year trendline is reasonable consistent; adding in the pre-WWII trendline only confuses things.

Now if one of the bulls can argue what seismic change in our society – comparable to the effects of the baby boom – has basically tripled the rent/price ratios from 1997-2006 then I’m all ears. Absent fundamental indicators to the contrary, and as supported by the recent pricing trends that support the return-to-trendline direction in pricing – I’m of the personal opinion that our pricing structure is going to go all the way and will probably overcorrect some before it stabilizes.

[Bugs]

The trendline made a big jump in the late 1940s; most economists attribute this to the postwar boom and the rise of the subdivision. There was another increase in the mid-late 1970s as a result of the changes in the tax laws.

As for why break it down to the 50-year cycle, one look at the charts should be sufficient to see that there was one trendline prior to WWII and a separate and much higher trendline starting in 1950. You could say the baby boom really did trigger that different trendline. Bear in mind, prior to this suburbia as such didn’t exist.

Excluding this last spike the 50-year trendline is reasonable consistent; adding in the pre-WWII trendline only confuses things.

Now if one of the bulls can argue what seismic change in our society – comparable to the effects of the baby boom – has basically tripled the rent/price ratios from 1997-2006 then I’m all ears. Absent fundamental indicators to the contrary, and as supported by the recent pricing trends that support the return-to-trendline direction in pricing – I’m of the personal opinion that our pricing structure is going to go all the way and will probably overcorrect some before it stabilizes.

[Bugs]

The trendline made a big jump in the late 1940s; most economists attribute this to the postwar boom and the rise of the subdivision. There was another increase in the mid-late 1970s as a result of the changes in the tax laws.

As for why break it down to the 50-year cycle, one look at the charts should be sufficient to see that there was one trendline prior to WWII and a separate and much higher trendline starting in 1950. You could say the baby boom really did trigger that different trendline. Bear in mind, prior to this suburbia as such didn’t exist.

Excluding this last spike the 50-year trendline is reasonable consistent; adding in the pre-WWII trendline only confuses things.

Now if one of the bulls can argue what seismic change in our society – comparable to the effects of the baby boom – has basically tripled the rent/price ratios from 1997-2006 then I’m all ears. Absent fundamental indicators to the contrary, and as supported by the recent pricing trends that support the return-to-trendline direction in pricing – I’m of the personal opinion that our pricing structure is going to go all the way and will probably overcorrect some before it stabilizes.

[DWCAP]

I am no bull, but occasionally I see one or two things they do. (usually just not to the same extent). Now I can be totally wrong, but didnt tax law change in 1997 to allow the deduction of up 500k in housing profits? (250k individual). Taxes on 500k is alot of money, something that would then be plowed into the value of the house.

Also the trend line pre WWII is nice to see, but not as usable as the trend line afterwards because lifestyle is differnet now. The boom in the late 1940’s is due to the rise of suburbia by returning WWII verterans and their starting families. Also, WWII started women in the work force, and while it took 20 years to bloom, the beginnings of it can be traced to lower middle income people deploying the female in the relationship to get a job to raise the standard of living. Nurses, teachers, secretaries, these were all acceptable jobs for women in the 1950’s that were often male dominated previously. Also previous to 1940 most people lived in cities or on rural farms and a car was an unusual thing. People either lived on the land they worked or near the factory/building.
The rise in 1970 can be attributed to the baby boom generation. The first boomers were born in 1946 and take that out to 23-24 years later (marrage and college age) and there is your spike. Demand from one of the largest generations hit the market. The boom in 1997 can be linked to a change in tax rates and demand from the baby boom generations children (1997-1970= 27years old).

None of this explains the giant spike observed between 2000 and 2007. That was loose lending and ignoring risk in lending markets. That will self correct. No generational or immigation shift I know of can explain the 2003-2005 insanity.

[DWCAP]

I am no bull, but occasionally I see one or two things they do. (usually just not to the same extent). Now I can be totally wrong, but didnt tax law change in 1997 to allow the deduction of up 500k in housing profits? (250k individual). Taxes on 500k is alot of money, something that would then be plowed into the value of the house.

Also the trend line pre WWII is nice to see, but not as usable as the trend line afterwards because lifestyle is differnet now. The boom in the late 1940’s is due to the rise of suburbia by returning WWII verterans and their starting families. Also, WWII started women in the work force, and while it took 20 years to bloom, the beginnings of it can be traced to lower middle income people deploying the female in the relationship to get a job to raise the standard of living. Nurses, teachers, secretaries, these were all acceptable jobs for women in the 1950’s that were often male dominated previously. Also previous to 1940 most people lived in cities or on rural farms and a car was an unusual thing. People either lived on the land they worked or near the factory/building.
The rise in 1970 can be attributed to the baby boom generation. The first boomers were born in 1946 and take that out to 23-24 years later (marrage and college age) and there is your spike. Demand from one of the largest generations hit the market. The boom in 1997 can be linked to a change in tax rates and demand from the baby boom generations children (1997-1970= 27years old).

None of this explains the giant spike observed between 2000 and 2007. That was loose lending and ignoring risk in lending markets. That will self correct. No generational or immigation shift I know of can explain the 2003-2005 insanity.

[DWCAP]

I am no bull, but occasionally I see one or two things they do. (usually just not to the same extent). Now I can be totally wrong, but didnt tax law change in 1997 to allow the deduction of up 500k in housing profits? (250k individual). Taxes on 500k is alot of money, something that would then be plowed into the value of the house.

Also the trend line pre WWII is nice to see, but not as usable as the trend line afterwards because lifestyle is differnet now. The boom in the late 1940’s is due to the rise of suburbia by returning WWII verterans and their starting families. Also, WWII started women in the work force, and while it took 20 years to bloom, the beginnings of it can be traced to lower middle income people deploying the female in the relationship to get a job to raise the standard of living. Nurses, teachers, secretaries, these were all acceptable jobs for women in the 1950’s that were often male dominated previously. Also previous to 1940 most people lived in cities or on rural farms and a car was an unusual thing. People either lived on the land they worked or near the factory/building.
The rise in 1970 can be attributed to the baby boom generation. The first boomers were born in 1946 and take that out to 23-24 years later (marrage and college age) and there is your spike. Demand from one of the largest generations hit the market. The boom in 1997 can be linked to a change in tax rates and demand from the baby boom generations children (1997-1970= 27years old).

None of this explains the giant spike observed between 2000 and 2007. That was loose lending and ignoring risk in lending markets. That will self correct. No generational or immigation shift I know of can explain the 2003-2005 insanity.

[DWCAP]

I am no bull, but occasionally I see one or two things they do. (usually just not to the same extent). Now I can be totally wrong, but didnt tax law change in 1997 to allow the deduction of up 500k in housing profits? (250k individual). Taxes on 500k is alot of money, something that would then be plowed into the value of the house.

Also the trend line pre WWII is nice to see, but not as usable as the trend line afterwards because lifestyle is differnet now. The boom in the late 1940’s is due to the rise of suburbia by returning WWII verterans and their starting families. Also, WWII started women in the work force, and while it took 20 years to bloom, the beginnings of it can be traced to lower middle income people deploying the female in the relationship to get a job to raise the standard of living. Nurses, teachers, secretaries, these were all acceptable jobs for women in the 1950’s that were often male dominated previously. Also previous to 1940 most people lived in cities or on rural farms and a car was an unusual thing. People either lived on the land they worked or near the factory/building.
The rise in 1970 can be attributed to the baby boom generation. The first boomers were born in 1946 and take that out to 23-24 years later (marrage and college age) and there is your spike. Demand from one of the largest generations hit the market. The boom in 1997 can be linked to a change in tax rates and demand from the baby boom generations children (1997-1970= 27years old).

None of this explains the giant spike observed between 2000 and 2007. That was loose lending and ignoring risk in lending markets. That will self correct. No generational or immigation shift I know of can explain the 2003-2005 insanity.

[Author]

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