Monthly rental price of a comparable home and the pricing of a two-bedroom home
Keywords:Econometric modeling, Home ownership, Real estate pricing
AbstractUsing single and multivariate OLS regressions, this study examines how the listing price of a two bedroom home is affected by the monthly rental price of a comparable home in the same city. We do this in order to provide some direction to young families looking to purchase their first home. Our data encompasses each state’s most populated city within the United States. This study reveals that as the monthly rental price of a comparable home (especially condos) increases, and/or as the price-to-rent ratio increases, so does the listing price of a two bedroom home. Therefore, a frugal home buyer should keep an eye on both comparable rental prices, and on the price-to-rent ratio within their city of interest. When rental prices drop, or when the price-to-rent ratio decreases, that is when a homebuyer should begin to consider the purchase of a two-bedroom home.
Zillow (2016, May). Zillow data. Seattle, WA. Retrieved from Zillow database.
Humphries, S. (2010, September 21). A Better Price-Rent Ratio. Retrieved from http://www.zillow.com/research/a-better-price-rent-ratio-280/
Stock, J. H., Watson, M.W. (2015). Introduction to econometrics: Updated third edition. Essex, England: Pearson Education.
X. Wei, lecture, May 9, 2016.
Authors who publish with this journal agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) after official publication, as it can lead to productive exchanges as well as greater citation of published work (See The Effect of Open Access).