Zillow Price-to-Rent Ratio
December 2018

Every month, Visible Equity (VE) publishes its credit union scorecard. This scorecard simply presents some summary statistics on loans contained in the VE database, some summary statistics from NCUA Call Report data, and a few trending plots of economic data. One of the trends found in the economic section includes the Zillow price-to-rent ratio (PTR), which is the focus of this blog.

Every quarter, Zillow makes some fascinating data available to the public. The data include the median home prices and median (monthly) rent for hundreds of metropolitan statistical areas (MSAs) throughout the U.S. Simply dividing the median home price by the annualized median rent (multiply the median rent by twelve) results in the PTR. The data can be downloaded using the following links.

Home Prices Q3 2018

Rent Q3 2018

The PTR gives us an idea of how home prices are performing relative to rent prices. This relationship can give us key insights. For example, the following plot shows the PTR for the entire country since about 1980. As you can see, the peaks of the line seem to suspiciously occur right around the time of recessions (or right before). And if we look at the most recent years, we see that a new peak might be forming. Now, we shouldn’t necessarily make any conclusions based solely on this plot, but it does seem to give us an idea of how the economy is performing to a degree.

An increasing PTR line implies that home prices are increasing faster than rent prices are, an increase that makes it less affordable for many people to own homes. Clearly, we are currently in such a state.

Just for kicks, we present the U.S. median home price and U.S. median rent trends in the following plots. One interesting takeaway is how the median rent steadily rises over time whereas the median home price has a severe peak and valley.

Let’s go through some superlatives for the current state of the U.S.

  • The MSA with the current highest median home price — San Jose, CA ($1,266,500)
  • The MSA with the current lowest median home price — Danville, IL ($55,800)

  • The MSA with the current highest median rent — Naples, FL ($3,524)
  • The MSA with the current lowest median rent — Johnstown, PA ($671)

  • The MSA with the current highest PTR — San Jose, CA (30.16338)
  • The MSA with the current lowest PTR — Elmira, NY (6.105991)

The U.S. PTR reached an all-time low in Q3 2011. Since then we’ve seen a ton of change. Now let’s conclude with some superlatives for the changes since Q3 2011.

  • The MSA whose percent change in median home price has increased the most since Q3 2011 — Merced, CA (139.07%)
  • The MSA whose percent change in median home price has increased the least (decreased the most) since Q3 2011 — Johnstown, PA (-10.40%)

  • The MSA whose percent change in median rent has increased the most since Q3 2011 —  Naples, FL (110.01%)
  • The MSA whose percent change in median rent has increased the least (decreased the most) since Q3 2011 — Danville, IL (-41.61%)

  • The MSA whose percent change in PTR has increased the most since Q3 2011 — El Centro, CA (150.37%)
  • The MSA whose percent change in PTR has increased the least (decreased the most) since Q3 2011 — Naples, FL (-24.01%)



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