Value Microcaps Motherboard

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Home prices vs rents

There was a good article in Fortune magazine last month that made a strong case that a further correction in home prices was required to match the rents in many areas. As I recall, over the longer term home values have averaged a certain multiple of gross rents. That relationship held true until a few years ago when home values took off leaving rental values far behind. They made a good argument that home prices in many areas still need to correct about 20% +/- before they return to their normal correlation to what the places would rent for. Either that or rents still need to increase substantially or most likely a combination of the two.


Bottom line: Likely we will see both higher rents and lower house values as the market corrects.