”I’m not familiar with this dataset but eyeballing the data and others I’ve seen of international comparisons it seems there’s a pretty tight correlation between price/income and population density, which seems intuitive, and America remains a rather sparsely populated country. The more relevant metric for investment purposes would probably be rental yield, and the figure I see here for US city centers of 10.5% as of 2019 seems totally out of whack with other data I’ve seen. Alex and I recently did a detailed analysis for a client who was considering buying a rental property in the Bay Area and after accounting for all relevant costs the net rental yield he was looking at was well below that on T-bills. SF is more overvalued than most cities and things have changed since 2019, but still. Now, you can find plenty of properties in the US outside the major cities where rental yields are quite attractive, but that’s a point I’ve been careful to make all along, my long held somewhat-anti-homeownership position has always been focused on the major US cities where housing prices are high (and most of our clients/prospects live). Alex has actually bought a few investment properties in middle-of-nowhere parts of the US and he has written/will be writing more about this on our blog.”
From Colby who wrote a post also examining such considerations several years ago comments:
”I’m not familiar with this dataset but eyeballing the data and others I’ve seen of international comparisons it seems there’s a pretty tight correlation between price/income and population density, which seems intuitive, and America remains a rather sparsely populated country. The more relevant metric for investment purposes would probably be rental yield, and the figure I see here for US city centers of 10.5% as of 2019 seems totally out of whack with other data I’ve seen. Alex and I recently did a detailed analysis for a client who was considering buying a rental property in the Bay Area and after accounting for all relevant costs the net rental yield he was looking at was well below that on T-bills. SF is more overvalued than most cities and things have changed since 2019, but still. Now, you can find plenty of properties in the US outside the major cities where rental yields are quite attractive, but that’s a point I’ve been careful to make all along, my long held somewhat-anti-homeownership position has always been focused on the major US cities where housing prices are high (and most of our clients/prospects live). Alex has actually bought a few investment properties in middle-of-nowhere parts of the US and he has written/will be writing more about this on our blog.”