Rising Rents = Upward Pressure on Home Prices

It’s a truism that the correlation between what a property will sell for vs. what it will rent for is one of the fundamental ways to assess whether a home is reasonably priced. In a recent Economist article, they said they believed that based on this equation, US homes were now very slightly undervalued. As rents go up, housing prices typically rise as well.

There have been many other articles about rents increasing in SF and the Bay Area. Here is a recent article from the Chronicle, an excerpt from the SF Controller’s Economic Barometer report for April, and a chart of SF rental asking rates created by Rentbits.com.

And don’t forget that we now have a sophisticated Rent vs. Buy calculator on our website: www.paragon-re.com (though you have to carefully fill in each financial assumption).

Apartment rents increase as vacancies fall
“Rent increases replaced landlord giveaways as U.S. apartment vacancies dropped in the second quarter to the lowest in more than three years, bolstered by rising demand on the West Coast, according to Reis Inc…Effective rents, or what tenants actually pay after perks such as a free month, climbed in 80 of the 82 metropolitan areas surveyed…San Jose led rent growth last quarter, followed by New York’s Westchester County and San Francisco, according to Reis.”