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Matt T.
  • Pleasant Hill, CA
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Why is the rent to price ratio inconsistent in similar markets?

Matt T.
  • Pleasant Hill, CA
Posted Mar 3 2012, 18:43

What does it say about a particular market when the rent to price ratio is higher for single family homes?

I’m in northern California and am looking at several markets on the outskirts of the bay area.

One of them is Tracy. In Tracy, houses that sell for 140K, generally get about 1300 a month in rent. These are retail prices and there are tons of houses that sell and rent for these prices. Yes, I know that these are not good deals, but I’m using off-the-shelf prices for the purposes of this question.

Another market is Antioch. In Antioch, houses that sell for 140K rent for about 1450 a month. Again, there are many homes that sell and rent for these rates.

What I want to know is what does it mean that houses can be had for the same amount, but rent for more in two markets that look and feel very similar? Does this mean that one market is declining? Is this an indicator of something I should know about?

It seems to me that if one place, Antioch, had superior traits, then the rents would be higher, but so would the prices. Why is this not the case?

There are a couple of other markets around the bay area that also seem equivalent but, have varying rent to price ratios. What do I not understand here?

Thanks.

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