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.

3 comments:

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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