Wednesday, February 13, 2008

Some hope on housing from Pasadena

I was running some rent to price ratio stuff there. I basically get that rent near Cal Tach and Downtown Pasadena is about $18 per square foot per year, and condos sell for about $400 per square foot. This give a ratio of 4.5 percent, or a price to rent ratio of 22. For purchasers requiring mortgage of less than $417K (an amount that will soon go up), mortgage rates are in the mid-fives right now, so the appreciation one would need to make one indifferent between renting and buying is between 3 and 4 percent (I will share my spreadsheet that does these calculations with anyone that is interested). This is not an unreasonable expectation.


Westside Bubble said...

But prices in Los Angeles are falling, per both DataQuick's median and S&P-Case-Shiller.

One explaination for this rent multiplier is rising prices; the other is that prices will fall.

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