Housing quiz answers

By Felix Salmon
April 30, 2010
I asked for the names of the two cities at the top of the housing-price and price-to-rent scales, and the correct answers started rolling in immediately: Honolulu and San Jose. Here's the chart with a bunch more names added in:

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The wisdom of crowds, it turns out, is pretty reliable. I asked for the names of the two unidentified cities at the top of the housing-price and price-to-rent scales, and the correct answers started rolling in immediately: Honolulu and San Jose. Here’s the chart with a bunch more names added in:

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Congratulations to stevenlyons, kmitchelson, petertemplar, and ACS, all of whom win a copy of Richard Florida’s new book.

5 comments

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Where is Boston? Perhaps it is not ploted.

Posted by david3 | Report as abusive

I suspect that the chart is extremely poorly constructed, to the point of being unusable.

I haven’t read the book, but I am fairly familiar with San Diego, which, according to this chart, has median housing price of ~380,000 and price to rent ratio of ~28.

These numbers would correspond to median rent of $1100/month. I can assure you that you absolutely can NOT rent a median house (or, in fact, almost any house) in San Diego for $1100/month. That kind of asking rent is more representative of a good 1-bedroom, or a very cheap 2-bedroom.

What seems to be happening here is that the “price to rent ratio” is really the ratio of a median HOUSE price to median asking APARTMENT rent. In other words, apples and oranges.

If you did price:rent ratios for identical houses, most of the city would probably be between 15 and 20.

Posted by Nameless | Report as abusive

In fact, the same is true for other “outlier” cities. Honolulu: median price 600,000, price-to-rent ratio allegedly 40. 600,000/40/12 = $1250/month. But a close inspection of Honolulu Craigslist would reveal that inventory below $1250/month is primarily 1 & 2-bedroom apartments, the median asking price for a 3-bedroom rental (presumably, representative of a median house) is around $1900: price-to-rent ratio 26.

Posted by Nameless | Report as abusive

Yes, medians are worthless for this purpose unless you closely control the population you measure. On the other hand, if I know me even a hint of Honolulu, you absolutely cannot get a median house in that city for $600k. Can you? Lessee… yep, median MLS ask for a single-family detached in Honolulu appears to be right around $1.0m. That said, a quick Craiglist search for the word “house” there gives you a median asking rent well above $1,900. Say $2100 min, though I bet that’s biased low by lack of geographic restriction. $1.0m / ($2100 * 12) == 40x.

That said, I am not defending this data set. I would lay odds that these measures reflect very different sets of housing stock. If I had the time (perhaps I’ll find some tonight) my first cut would be to jam together the ACS’s VALP residential value data with the CPI’s owner’s equivalent rent. I’m not even sure the latter is available, but if it is and if the BLS helps you weight it correctly, that’d probably be your best guess.

Local SF data points for context: our apartment would sell for ~24x what we pay, and a luxury unit around the corner that failed to rent at (best guess) the lease equivalent of 13x recently found tenants at what still seems a very high rent and maybe 16x. So 40x strikes me as pretty outlandish, even in HI.

Guess I’ll be playing with government data sets tonight.

Posted by wcw | Report as abusive

I do not know much about Honolulu, but there is this source

http://www.honoluluadvertiser.com/articl e/20100407/BREAKING03/100407031/Oahu-hom e-sales-median-price-rise-in-March-from- year-ago

which says that March ’10 median sales prices on Oahu were 599 (detached) and 310 (condo).

And US News

http://www.usnews.com/money/best-places/ listing/hawaii/honolulu/housing#tabs

claims that the median price (both detached and attached?) is only 375.

Posted by Nameless | Report as abusive