One of the best metrics for evaluating whether your city is in a Housing Bubble is “Price to Rent Ratio”. This metric, which can be calculated based on data from Zillow, takes the typical home price in a market and divides it by the typical Annual Rent. The higher that home prices go above rents in a real estate city, the more likely it is to crash.
Home prices in Austin have increased by a whopping +30% over the last year. Meanwhile, rents have only grown by +3% according to data from Zillow. That 10:1 Home Price to Rental Rate growth ratio is by far the highest in the country, and indicates that Austin is in a bubble.
Price to Rent Ratio has a huge predictor of the last housing crash, with markets experiencing the highest P/R increases from 2001-06 being the ones with the biggest price declines from 2007-12. Will history repeat itself?
Other markets, in addition to Austin, with big Price to Rent increases lately include Boise, San Jose, San Francisco, Seattle, and Salt Lake City. Not so coincidentally, housing inventory in these markets has spiked over the last four months, meaning more and more homes are hitting the market for sale.
These are the markets where the 2021 Housing Crash will likely start. They could face home price declines as high as 30-35% over the next several years.
“Home Values / ZHVI”
“Rentals / ZORI”
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0:00 Austin Housing Collapse
1:47 Key Metric: Price to Rent Ratio
4:25 The Price / Rent Balance
7:13 3 Big Reasons why Inventory Goes Up
8:57 Learning from the 2007-08 Crash
12:05 Crash Comes after Price to Rent UP
13:59 5 Other Cities in a BIG BUBBLE
16:10 The California Connection
17:49 Inventory SURGE in These Markets
20:40 Informed Decisions with Data
#HousingBubble #HousingCrash #AustinHousingMarket