Given Rent Prices, Homes Still Too High

If rent prices are any indication, home prices aren’t done falling, according to one former and two current Federal Reserve economists. Annual rents have historically held steady at about 5% of home prices, but since 1996 home prices have left rents in the dust, the Wall Street Journal explains. Housing would need to fall 15% over five years to restore order.

That number assumes that rents will increase about 4% each year, but their actual growth may be even slower if homeowners start renting out the glut of unsold houses on the market. Fed policymakers may or may not agree with the report, but the same methodology has been used many times, and the Congressional Budget Office reached similar conclusions. (More housing market stories.)