Is housing market reaching bottom in Central California?
By J.N. Sbranti | Modesto Bee
A new way of calculating the actual value of a house indicates that maybe, just maybe, Northern San Joaquin Valley home prices have hit bottom.
A national analysis on the cost of renting versus owning a home uses historic trends to determine a "floor" for home prices. That study, released Tuesday, predicts whether those who buy homes today will gain or lose equity during the next four years.
It's based on ratios comparing rental costs to home prices, dating back to 1895.
The formula determines that the right price for a house is roughly 15 times its annual fair market rental rate.
So if a Modesto home can be rented for $1,000 a month, its value would be about $180,000 ($12,000 per year multiplied by 15).
The median sales price for Stanislaus County homes fell to $179,000 in September. The county's median rental home rates, meanwhile, are more than $1,000 per month.
Therefore, the "theoretical and empirical underpinnings of the relationship between home prices and rents" could indicate that now is the time to buy.
Read the complete story at modbee.com
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