The example the Bee uses is, “a $150,000 that could rent for $10,000 a year is said to be in equilibrium. Any ratio above 15-to-1 is deemed inflated. In cities with those higher ratios, the report contends, renters are less likely to take the plunge into ownership”
The best way to look at this in Alameda terms is to reverse the equation and look at rental rates then look at home prices.
Below is a chart of the 15-1 ratio.
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Based on a quick check of Craigslist, three and four bedroom homes rent on average $2,090, from July 27 to August 10. The low side is in the $1,500 range and the high side as just over $3,000 per month.
Base on the rental rates there are three homes that fit into the 15-1 ratio.
The current active inventory of 159 home has an average list price of $686,000. Based on that number rental price would have to be at over $3,500 per month. The ratio for Alameda is 27.35 to 1 nearly double equilibrium.
As expected, cities close to the coast had higher ratios than those inland. According to the Bee article San Jose is the least attractive market for renters with a ratio of 29.4-to-1, even though declining home prices have dropped it from 35-to-1 in the past year. The study also lists the San Francisco-Oakland area (23.7-to-1) and Los Angeles-Long Beach (21.5-to-1) among the metropolitan areas with particularly high ratios, as well as San Diego (19.3-to-1), and Ventura (20-to-1).
Inland regions, where home prices have dropped more dramatically, have edged into the area of relative affordability including Riverside-San Bernardino (13.7-to-1), Bakersfield (14.7-to-1), Modesto (15-to-1) and Stockton (14.2-to-1). Fresno almost made the cut at 15.8-to-1.
The take away for me is you just do not buy in Alameda because it is affordable; it is the lifestyle choice that you pay a premium for in selecting a place to live.
Today’s Inventory Data: Just a quick note on inventory. Inventory has declined for three consecutive weeks and dipped below 160 units.
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