Where to Buy: Price-to-Rent Ratio in 76 US Cities

Original Article

Price, Rent, BUY, COMPETEREA, EXP, NANA SMITH

The price-to-rent ratio is a measure of the relative affordability of renting and buying in a given housing market. It is calculated as the ratio of home prices to annual rental rates. So, for example, in a real estate market where, on average, a home worth $200,000 could rent for $1000 a month, the price-rent ratio is 16.67. That’s determined using the formula: $200,000 ÷ (12 x $1,000).

Price-to-Rent Ratio by City

Using U.S. Census data, SmartAsset calculated the price-to-rent ratio in every U.S. city with a population over 250,000. Applying that ratio, we also calculated a projected average home price for a house or apartment that rents for $1,000 in each market.

Note that actual home values will vary based on factors such as proximity to commercial centers, access to transit and home size—rentals tend to be smaller (and therefore less expensive) than for-sale properties, so these values may overestimate true market prices.

Renting vs. Buying

The cities with the highest price-to-rent ratios are San Francisco, Honolulu and New York City, which means that they are least friendly to buyers. San Fran’s price-rent ratio of 45.02 is reflective of a market that is highly unfavorable to buyers, although with rents soaring that may soon change.

In NYC, an apartment that rents for $1,000 should cost around $433,920. That, however, represents the entire market—all five boroughs. In Manhattan and Brooklyn, the numbers look even worse. Here are the price-to-rent ratios for the five New York boroughs individually (prices for $1,000 rental in parenthesis):

Manhattan – 49.98 ($599,760)

Brooklyn – 42.31 ($507,720)

Queens – 30.05 ($360,600)

The Bronx – 32.54 ($390,480)

Staten Island – 35.83 ($429,960)

Based on its ratio of rental costs to home values, Manhattan is probably the most expensive place to buy a home in the country. At the other end of the spectrum are places like Houston, San Antonio and Dallas. These Texan markets are very favorable to home-buyers, with ratios below the national average price-to-rent ratio of 18.92.

The city with the lowest ratio in the United States is Detroit, with a price-to-rent ratio of 5.60. That means that a $1,000 rental in Detroit should sell for just $67,200. Indeed, Wayne County, in which Detroit is located, is the best county for buyers in Michigan.

Historical Price-to-Rent Ratio

National and city price-to-rent ratios have risen and fallen over the years depending on the state of the housing market. In the years before the housing crisis, as the housing market heated up, the national ratio rose from 22.73 (in 2005) to 24.50 (in 2007). Then, however, after the real estate market turned, as home prices fell and rentals grew more expensive, the ratio began to fall, dipping below 20 in 2011, down to the current rate of 18.92.

Before the housing bubble and subsequent crisis, the average hovered somewhere around 15. That indicates that we are still in a time period that is more favorable to renters than buyers from a historical perspective.

What Price-to-Rent Ratio Says About Affordability

While the price-to-rent ratio is useful for comparing buying to renting, it does not reflect the overall affordability of buying or renting in a given market. In theory, a place where renting and buying are very expensive could have the same price-to-rent ratio as a place where both renting and buying are very cheap.

Take San Francisco for example. San Fran has the highest price-to-rent ratio in the country, which indicates that renting should be more affordable than buying in the City by the Bay. However, as we all know, rentals in San Francisco are very expensive. The city’s high price-rent ratio is only reflective of the fact that buying is relatively more expensive than renting. It does not saying anything about absolute affordability of either buying or renting in that city.

PRICE-TO-RENT RATIO
City Price-to-Rent
Ratio
Home Price
(for a $1,000 Rental)
San Francisco, California 45.02 $540,240
Honolulu, Hawaii 40.2 $482,400
New York, New York 36.16 $433,920
Oakland, California 35.73 $428,760
Los Angeles, California 34.69 $416,280
San Jose, California 34.56 $414,720
Seattle, Washington 33.47 $401,640
Long Beach, California 32.62 $391,440
Washington, D.C. 32.09 $385,080
San Diego, California 29.52 $354,240
Portland, Oregon 28.7 $344,400
Anaheim, California 28.55 $342,600
Boston, Massachusetts 27.56 $330,720
Denver, Colorado 26.46 $317,520
Chula Vista, California 26.02 $312,240
Jersey City, New Jersey 24.75 $297,000
Santa Ana, California 23.97 $287,640
Austin, Texas 22.67 $272,040
Anchorage, Alaska 22.51 $270,120
Colorado Springs, Colorado 22.02 $264,240
Raleigh, North Carolina 21.83 $261,960
Miami, Florida 21.76 $261,120
Lexington, Kentucky 21.67 $260,040
Albuquerque, New Mexico 21.53 $258,360
Sacramento, California 21.42 $257,040
Atlanta, Georgia 21.35 $256,200
Chicago, Illinois 21.07 $252,840
Minneapolis, Minnesota 21.06 $252,720
Newark, New Jersey 20.85 $250,200
Greensboro, North Carolina 20.44 $245,280
Virginia Beach, Virginia 20.38 $244,560
Lincoln, Nebraska 20.11 $241,320
Louisville, Kentucky 20.08 $240,960
Riverside, California 20.07 $240,840
New Orleans, Louisiana 19.97 $239,640
Bakersfield, California 19.95 $239,400
Plano, Texas 19.46 $233,520
Fresno, California 19.32 $231,840
Nashville, Tennessee 19.32 $231,840
Oklahoma City, Oklahoma 19.17 $230,040
St. Paul, Minnesota 18.93 $227,160
Phoenix, Arizona 18.71 $224,520
Cincinnati, Ohio 18.68 $224,160
Mesa, Arizona 18.15 $217,800
Henderson, Nevada 18.15 $217,800
Charlotte, North Carolina 18.12 $217,440
Wichita, Kansas 17.77 $213,240
Omaha, Nebraska 17.61 $211,320
Aurora, Colorado 17.32 $207,840
Stockton, California 17.26 $207,120
Tulsa, Oklahoma 17.19 $206,280
Kansas City, Missouri 16.92 $203,040
Las Vegas, Nevada 16.4 $196,800
Tucson, Arizona 16.24 $194,880
Baltimore, Maryland 16.15 $193,800
St. Louis, Missouri 16.09 $193,080
Columbus, Ohio 15.76 $189,120
Arlington, Texas 15.72 $188,640
Tampa, Florida 15.63 $187,560
Indianapolis, Indiana 15.3 $183,600
Fort Wayne, Indiana 15.29 $183,480
Philadelphia, Pennsylvania 15.28 $183,360
Dallas, Texas 14.97 $179,640
Houston, Texas 14.77 $177,240
El Paso, Texas 14.71 $176,520
Milwaukee, Wisconsin 14.49 $173,880
Fort Worth, Texas 14.18 $170,160
Jacksonville, Florida 14.06 $168,720
San Antonio, Texas 13.96 $167,520
Corpus Christi, Texas 13.09 $157,080
Toledo, Ohio 12.56 $150,720
Pittsburgh, Pennsylvania 12.19 $146,280
Memphis, Tennessee 12.06 $144,720
Cleveland, Ohio 10.97 $131,640
Buffalo, New York 10.73 $128,760
Detroit, Michigan 5.6 $67,200

The Difference A Year Can Make

Payment-Difference-KCM

Some Important Points To Consider:

  • The latest Freddie Mac Primary Mortgage Market Survey reports the 30-year fixed rate at 3.7%.
  • Freddie Mac’s projection for Q2 2016 is that the rate will be 4.7% (a full percentage point higher)
  • The Home Price Expectation Survey predicts that home prices will appreciate by 4.4% during this same time

The impact waiting a year to purchase your dream home can make on your monthly payment is significant. Contact a local real estate professional today to discuss your options before the experts’ predictions become reality!

Selling Your House? Price it Right Up Front

Price-It-Right (1)

In today’s market, where demand is outpacing supply in many regions of the country, pricing a house is one of the biggest challenges real estate professionals face. Sellers often want to price their home higher than recommended, and many agents go along with the idea to keep their clients happy. However, the best agents realize that telling the homeowner the truth is more important than getting the seller to like them.

There is no “later.”

Sellers sometimes think, “If the home doesn’t sell for this price, I can always lower it later.” However, research proves that homes that experience a listing price reduction sit on the market longer, ultimately selling for less than similar homes.

John Knight, recipient of the University Distinguished Faculty Award from the Eberhardt School of Business at the University of the Pacific, actually did research on the cost (in both time and money) to a seller who priced high at the beginning and then lowered the their price. In his article, Listing Price, Time on Market and Ultimate Selling Pricepublished in Real Estate Economics revealed:

“Homes that underwent a price revision sold for less, and the greater the revision, the lower the selling price. Also, the longer the home remains on the market, the lower its ultimate selling price.”

Additionally, the “I’ll lower the price later” approach can paint a negative image in buyers’ minds. Each time a price reduction occurs, buyers can naturally think, “Something must be wrong with that house.” Then when a buyer does make an offer, they low-ball the price because they see the seller as “highly motivated.” Pricing it right from the start eliminates these challenges.

Don’t build “negotiation room” into the price.

Many sellers say that they want to price their home high in order to have “negotiation room.” But, what this actually does is lower the number of potential buyers that see the house. And we know that limiting demand like this will negatively impact the sales price of the house.

Not sure about this? Think of it this way: when a buyer is looking for a home online (as they are doing more and more often), they put in their desired price range. If your seller is looking to sell their house for $400,000, but lists it at $425,000 to build in “negotiation room,” any potential buyers that search in the $350k-$400k range won’t even know your listing is available, let alone come see it!

A better strategy would be to price it properly from the beginning and bring in multiple offers. This forces these buyers to compete against each other for the “right” to purchase your house.

Look at it this way: if you only receive one offer, you are set up in an adversarial position against the prospective buyer. If, however, you have multiple offers, you have two or more buyers fighting to please you. Which will result in a better selling situation?

The Price is Right

Great pricing comes down to truly understanding the real estate dynamics in your neighborhood. Look for an agent that will take the time to simply and effectively explain what is happening in the housing market and how it applies to your home. You need an agent that will tell you what you need to know rather than what you want to hear. This will put you in the best possible position.

Two Graphs that Scream – List Your Home Today!

Two-Graphs

We all learned in school that when selling anything, you will get the most money if the demand for that item is high and the inventory of that item is low. It is the well-known Theory of Supply & Demand.

If you are thinking of selling your home, here are two graphs that strongly suggest that the time is now. Here is why…

DEMAND

According to research at the National Association of Realtors (NAR), buyer activity last month (January) was three times greater than it was last January. Purchasers who are ready, willing and able to buy are in the market at great numbers.

DEMAND


SUPPLY

The most recent Existing Home Sales Report from NAR revealed that the months’ supply of housing inventory had fallen to 4.4 months which is the lowest it has been in over a year.

SUPPLY-of-HOMES

Bottom Line

Listing your house for sale when demand is high and supply is low will guarantee the offers made will truly reflect the true value of your property.

ARE YOU LOOKING TO BUY A FORECLOSURE? CLICK ON THE IMAGES ABOVE AND YOU WILL SEW WHAT IS AVAILABLE IN GREENWICH CT. OR FILL UP THE FORM BELOW.

HAPPY HUNTING!

NANA
203-212-3788
eXp REALTY

This Zero-Emission Home Creates Enough Energy To Power An Electric Car For One Year

This just might just be the most beautiful zero-emission home we have ever laid eyes on. Snøhetta, a design firm in Norway, has created the ZEB Multi-Comfort House in Ringdalskogen, Larvik, Norway. The house not only runs solely on solar energy, but collects enough extra solar energy to power an electric car for one year.

house1

ZEB took 10 months to build and, according to Kristian Edwards, the lead architect of the project, a very intricate process was employed to ensure that the solar energy would be used at the highest efficiency.

house1

The result? A home with striking features like a tilted roof that is slanted at a 19-degree angle to accommodate the photovoltaic panels (the ones that provide electricity) and the solar thermal panels (the ones that provide heat and hot water). Edwards told The Huffington Post that the roof also provides a dramatic flair to the inside of the home. “It is perhaps the most striking element of the upper floor,” he says. “Relatively small bedrooms gain great volume, hugely beneficial to sleep comfort, light transmission and of course, a certain drama.”

house4

In the atrium, Edwards used recovered brickwork from a barn that was being demolished. “The recovered brick serves a thermal mass which passively contributes to balance temperature spikes,” says Edwards.

house3

There are currently no tenants in the home. However, Edwards says that there are plans in the works to have families occupy the space “in order to realistically test the building and system performance.” Feedback from visitors has been “generally extremely positive,” he adds.

house5

Despite it’s forward-thinking approach, Edwards says the goal of ZEB was to create a place that is welcoming and comfortable, with energy-saving features that virtually disappear into the background. “Our goal was to ensure that the house, whilst advanced, is predominantly welcoming,” says Edwards. “The outdoor covered atrium with a fireplace gives a welcome extension of the outdoor season that is fundamental to the Norwegian culture. This shows that the steps toward zero carbon housing need not represent a quantum leap in lifestyle, and therefore, makes it simpler and quicker to make the switch.”

house6

Original Article

 

Appraisal Tool for Lenders

If this tool is that great why they would not let appraisers to use it to?

images

October 20, 2014

Fannie Mae Announces Appraisal Tool for Lenders

New Tool Provides Increased Clarity, Certainty for Lenders to Help Prevent Repurchases

Keosha Burns

202-752-7840

WASHINGTON, DC – Today, Fannie Mae (FNMA/OTC) announced that it will make its proprietary appraisal analysis application available to lenders in early 2015, allowing lenders to compare appraisals against Fannie Mae’s database of appraisal and market data. The company currently uses the tool, Collateral Underwriter, to analyze appraisals when a lender delivers a loan to Fannie Mae. Collateral Underwriter will help lenders expand access to mortgage credit by providing increased certainty around repurchase risk.

“Our goal is to provide relief on appraisal representations and warranties in the future, and we will work with FHFA to do so,” said Andrew Bon Salle, Executive Vice President, Single-Family Underwriting, Pricing, and Capital Markets. “We want to be the business partner of choice for lenders by providing the tools and products lenders need.  Collateral Underwriter will help lenders build their businesses safely and strongly.”

Fannie Mae began receiving appraisals in electronic format from lenders in 2012, and built Collateral Underwriter to analyze that data.  Collateral Underwriter leverages Fannie Mae’s market data and analytical models to perform a comprehensive assessment of the appraisal.  The tool provides an overall risk score and detailed messaging to highlight specific aspects of the appraisal that may warrant further attention. Collateral Underwriter will be integrated with Fannie Mae’s Desktop Underwriter® software to seamlessly incorporate into a lender’s existing underwriting process.  Using Collateral Underwriter during the origination of the loan will allow the lender to assess the appraisal and address any issues prior to closing and delivery to Fannie Mae.

Collateral Underwriter is the latest addition to a suite of Fannie Mae industry tools, including Desktop Underwriter and Early Check, that help lenders make loans with confidence.  These tools help lenders identify eligibility issues earlier in the process, providing more certainty that loans will meet Fannie Mae’s requirements.

Original Source is Here

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AMC Appraisal Perspective Through Rhetorical Misdirection

Spot on. Unfortunately this is about to get even more surreal when Fannie rolls out their big data Collateral Underwriter Tool. Again, if this data is so awesome, why won’t they share it with the appraisers?

FNMAFanniemae, completeREA, CREA, Nana Smith, 203-212-3788

Part below is a blog from the MatrixBlog of MIller Samuel Inc. Real Estate Appraisers & Consulting, I came across this morning once my frustration with AMCs companies came to climax!

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“As much as I think I held their attention for the entire hour allotted, my presentation fell short of getting audience adrenaline pumping like the Jordan Petkovsky, the Chief Appraiser of a TSI Appraisal, a large national AMC and affiliated with Quicken Loans. I still wonder how beneficial this public relations could be by talking to the industry like a politician – as if residential appraisers were clueless to the “incredible benefit” that AMCs provide our industry.

Here are a few of the questions (paraphrased) posed to an audience comprised of heavily experienced residential and commercial appraisers:

Q: “I realize there is friction between AMCs and appraisers. What has to happen to solve this problem?”
A: Someone in audience: “Someone has to die” followed by a burst of laughter from the entire room.

Q: “We spend millions on powerful analytics. Wouldn’t it be great for appraisers to get their hands on this technology?” (repeated 2 more times slowly for effect).”
A: Someone answered: “You have to spend millions on technology because the appraisal quality is so poor you need to analyze the markets yourself.”

Q: “How do we attract new appraisers into the business?”
A: My answer “Until appraisers are fairly compensated when banks are made to be financially incentivized to require credible reports, nothing will change.”

Q: “How do you think banks feel about the reliability of appraisals today? They don’t feel the values are reliable.”
A: My answer “Because AMCs pay ±half the market rate, they can only mostly attract form-fillers (aka “corner-cutters”). They don’t represent the good appraisers in the appraisal industry.”

Q: “We focus a tremendous amount of effort on regulatory compliance on behalf of banks and boy are they demanding! We even have a full time position that handles the compliance issues.”
A: My comment – that’s a recurring mantra from the AMC industry as a scare tactic to keep banks from returning to in-house appraisal departments. Prior to 2006 boom and bust cycle and the explosion of mortgage brokers with an inherent conflict of interest as orderers of appraisals, the profession was pretty good at providing reliable value estimates. The unusually large demands by regulators (if this is really true and I have serious doubts) is because the AMC appraisal quality is generally poor. If bank appraisal quality was excellent, I don’t believe there would be a lot of regulatory inquiries besides periodic audits.

What I found troubling with his presentation – and I have to give him credit for walking into the lion’s den – is how the conversation was framed in such an AMC-centric, self-absorbed way. I keep hearing this story pushed by the AMC industry: The destruction of the modern appraisal industry was the fault of a few “bad actors” during the boom that used appraisal trainees to crank out their reports. That’s incredibly out of context and a few “bad actors” isn’t the only reason HVCC was created – which was clearly inferred.

Back during the boom, banks closed their in-house appraisal centers because they came to view them as “cost centers” since risk was eliminated through financial engineering – plus mortgage brokers accounted for 2/3 of the mortgage volume. Mortgage brokers only got paid when the loan closed, so guess what kind of appraisers were selected? Those who were more likely to hit the number – they were usually not selected on the basis of quality unless the bank mandated their use. Banks were forced to expand their reliance on AMCs after the financial crisis because the majority of their relationships with appraisers had been removed during the bubble – the mortgage brokerage industry imploded and banks weren’t interested in re-opening appraisal departments because they don’t generate short term revenue.

The speaker spent a lot of time talking like a politician – “we all have to work together to solve this problem” “appraisers have to invest in technology.” When asked whether his firm had an “AVM”, he responded almost too quickly with “No” and then added “but you should see our analytics!”

The residential appraisers in the audience were largely seething after the presentation based on the conversations I heard or joined with afterwords.

It’s really sad that appraisers don’t have a real voice in our future. We’ve never had the money to sway policy creation and we can’t prevent the re-write of history.

See full article bellow

MatrixBlog

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Office: +1 203 212 3788

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27 Fifth Street, 2nd Floor, Stamford CT 06903

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