Distribution of house rental and sales price
Mab A
December 28, 2017
Introduction
Housing is the most significant investment an average-income family will ever make over entire lifetime - whether it is buying a house or living in rental houses for a better part of life.
Previously I worked with housing data, but in a smaller scale. I was mostly interested in how and to what extent metro stations affect apartment rents. This one, on the other hand, is a large and interesting time series dataset with some really cool features. However, to begin with I am interested in the big picture questions in terms of rentals and property prices. Specifically: (1) the evolution of (trend) house rental and sales price, and (2) how rental and sales prices vary across states. This analysis provides some interesting insights as we willsee shortly below.
Trends in rental price
I used rental rate in US$/ft2 of property. Ft2 is a standardised way of comparing different types (e.g. 1-bedroom vs 3-bedrooms) and sizes (e.g. small vs big) of properties. Although the dataset is a time series from 1996 to 2017, rental price was not available before 2010. So this is really a recent trend in rental price.
So what it shows is a significant jump in house rents in a short time period. In 2010 median renatal price was below 0.5 USD/ft2, which has trippled in 2017 to over 1.5 USD/ft2. I am not sure if the price is adjusted for inflation or not.
Trends in house price
House price, on the other hand, is reported for longer term in the dataset, since 1996. As can be seen in Figure 2, house price grew almost exponentially up until around 2007 and that’s when the housing market crashed. The price continued its downfall until 2012-ish, and picking up again. House price is now close to it’s pre-crash level and will likely exceeed it in 2018.
The median house price has doubled from around 80 US$/ft2 in 1996. If adjusted for inflation, I would say it is less dramatic than rental price (which trippled in just 5-6 years). As we will see shortly, those numbers are skewed a lot by just few big cities around the countries.
Rental price by state
Who’s surprised that NY, DC, MA HI and CA are top 5 states with the highest house rents? Pooling all the data from 2010 shows that NY has by far the highest house rents - more than 4 USD/ft2. That’s a lot! This means, for a 900 ft2 2-bedroom apatment New Yorkers pay $3,500. I’m pretty familiar with DC area house rents. $2.5/ft2 - or $2200 for a 2-bedroom apartment is typical in this area. But in contrast consider the other side of the spectrum - think about how much can be saved by living in states such as AL, AK, GA.
House sales price by region
In terms of house price, the distribution is similar as in rental price. 5 tops are usuals suspects - DC, HI, CA, MA NJ. The states where you can buy cheapest houses are in WV, OK, AK, AL, GA.
