• Is the housing price-rent ratio a leading indicator?

    2 monthes ago - By FRED

    Economic forecasters are always on the lookout for variables that can help predict upcoming recessions. One such variable that has gotten some recent attention is the housing price-rent ratio. As this ratio becomes higher, the rental option becomes more attractive. If it rises high enough, some households might switch from owning their homes to renting them; then the demand for owner-occupied housing would fall. The result is a contraction in the housing market that can have adverse effects on the entire economy. This narrative seems to match well with the behavior of the housing...
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