Saturday, October 29, 2005

Fool's Rule in Marin [updated]

[Update: I found average rental data for Marin for the years 1980 and 1990 from a different data source. I included them in the graph.]

Or do fools rule in Marin?

Someone asked how the Motley Fool Rule works out for Marin. Here it is. I divided the mean Marin SFH sales price by Marin's mean monthly rent.


Blogger David said...

d*Mn nice graph

Oct 29, 2005, 10:36:00 PM  
Anonymous Anonymous said...

I would be interested to see if this chart can be taken further back in time. Has the average Marin ratio always been about 425, as it was it the latter half of the 90's, or is even this lower number still an aberration? Seems like this is an excellent tool to determine when the Marin market has returned to normal. We just need to know what the historic normal ratio value is for Marin.

Oct 30, 2005, 12:45:00 AM  
Blogger marin_transplant said...

I have almost the same question as doc. I would like to know when, if ever, Marin has been below the magic 200 level that Motley Fool describes. My guess is that it has been at or below that number in the past, but not since the late 60's/early 70's.

Oct 30, 2005, 1:00:00 AM  
Blogger Marinite said...

When I get data for a series like this I try to get data that all comes from the same source. That way, any systematic bias in the measuring that results in the data is constant for all data points. I have not found data for average Marin rents that go back any further than what I show and that also all come from the same source. But I will try.

But since there is interest, I will tack on someone else's data despite my concerns about non-systematic bias. So if you know the average Marin rents for prior years, send them to me as I have mean yearly sales price data going back to 1969

Oct 30, 2005, 9:38:00 AM  
Blogger Marinite said...

I added the data for 1980 and 1990 even though it comes from a different data source. So it looks like the Fool ratio was < 200 prior to 1980.

Oct 30, 2005, 11:18:00 AM  
Blogger marine_explorer said...

I find it very interesting to compare this graph to the many housing price indices for '00-05. Like Shiller's graph, it clearly shows housing costs gave gone far beyond the long-term, historical norm. When data from Marin and other bubble markets looks very similar, we might conclude Marin is just as overpriced as elsewhere--and will correct accordingly.

The graph also suggests to me that properts costs have spun so far out of control that it must be increasingly hard to derive income (rent) from these investments. Given the level of "investment property" ownership by Marin residents (isn't this a Marin hobby?), I wonder if these properties will burn holes in balance sheets if home values inevitably flatten.

Of course, Marin is "special" and deserves the high prices, but like Santa Barbara, Seattle, and other self-described "unique" areas, I'm not sure local pride will translate into extra value in the minds of buyers, particlularly those who live outside the county.

Oct 31, 2005, 8:47:00 AM  
Blogger marin_transplant said...

Boy, that's an eye-opener. Marin appears to have become too pricey right after the Reagan tax cuts kicked in.

Guess that's what happens when you radically cut the taxes paid by the rich - they use the extra cash to buy real estate in Marin.

Oct 31, 2005, 8:49:00 AM  
Blogger sf jack said...

Good work!

I think when one combines this with your earlier graph of Marin home prices vs. median incomes (wasn't that it?) - it's really unmistakeable what is going on.

The cyclical nature of the market appears more easily in the earlier graph, but the insanity of the present is apparent in this one.

Oct 31, 2005, 12:16:00 PM  

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