Price growth has exceeded rent growth in national indexes for single-family homes, according to CoreLogic chief economist Frank Nothaft. But what would ordinarily be a signal of trouble has been offset by a couple of factors. However, there's no guarantee how long that might continue.
"Home prices rose a whopping 20% over the past year and rents on single-family homes were up 13%, according to the CoreLogic national Home Price Index and Single-Family Rent Index," Nothaft wrote. With the disparity, he raised the question of whether that might mean homes are overvalued.
The math is simple on the surface, as he noted. The price of a rental home should be equal to the net operating income divided by the capitalization rate. Prices have been going up because investors essentially are trying to buy into ongoing growth of net operating income through the growth of rents.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
