The rent-price ratio for the aggregate stock of owner-occupied housing

We construct a quarterly time series of the rent-price ratio for the aggregate stock of owner-occupied housing in the United States, starting in 1960, by merging micro data from the last five Decennial Censuses of Housing surveys with price indexes for house prices and rents. We show that the rent-price ratio ranged between 5 and 5.5 percent between 1960 and 1995, but rapidly declined after 1995. By year-end 2006, the rent-price ratio reached a historic low of 3.5 percent. For the rent-price ratio to return to its historical average over, say, the next five years, house prices likely would have to fall considerably.