The Rent to Price Ratio- What is it Telling Us ?
The Rent to Price Ratio is one barometer many economists use to gauge home values and the trends in home prices. Can we calculate the trend in Ventura County Housing using these numbers ? This will be the first article in a series where we attempt to define the trend in home prices in Ventura County using the Rent to Price Ratio and other often published figures.
Using figures published by Fortune Magazine in 2007, http://money.cnn.com/magazines/fortune/price_rent_ratios/the rento to price ratio for Los Angeles was 16.7%. (the relationship in annual rents to home prices) Orange County had a 24.3 % P/R Ratio over a 15 Year period and The Inland Empire was 18.7 %. so we will use the avg of these for Ventura County or 20.0%. This mens on average annual rents will be 20% of a homes value. Our research has found that these published numbers vary greatly depending on the publication. We will attempt to calcualte the avg. Rent to Price Ratio in Ventura county after we complete our research.
To calculate the R/P Ratio for Thousand Oaks we will take data from April of 2009. The avg. rent for a home in Thousand Oaks was $2375.00. Based on historical rent to price ratios, the value of this house would be around $560,000, well above the median priced Ventura County Home. Whats is this telling us ?
This article lays the groundwork for our series of articles on housing data and the numbers behind them which can be very deceiving. Our housing research project will aim to get to the bottom of the numbers to help our clients get a true picture of the rental and overall housing markets in Ventura County.
Presidio Rental Solutions is a leader in Property Management and Leasing in Ventura County California.