Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Globe Investor

Inside the Market

Up-to-the-minute insights
on developing market news

Entry archive:

U.S. home prices: No bottom yet Add to ...

The blogger Calculated Risk has looked beyond Tuesday morning's U.S. house price figures, which showed a disappointing 19.1 per cent dip in the first quarter, year-over-year. Using three key measures - price-to-rent, price-to-income and real prices based on the S&P/Case-Shiller quarterly national home price index - the blogger thinks home prices have further to fall.

The most digestible of the three ratios - price-to-rent - compares home prices to equivalent rents (using the national home owner's equivalent rent from the Bureau of Labour Statistics). The ratio surged earlier this decade as home prices rose and has since plunged, but not far enough, according to Calculated Risk. In fact, the unwinding of the ratio may be only 85 per cent complete to get it back in line with the long-term average.

Worse, rents could be declining as well, which will upset the ratio and send home prices falling even further than they otherwise would.

Follow on Twitter: @dberman_ROB

 

For Globe Unlimited Subscribers

Business videos »

Most popular videos »

Highlights

Most Popular Stories