HotPads has introduced an exciting tool for housing shoppers trying to navigate today's housing market: Rent Ratio Heat Maps.
Our Rent Ratio Heat Maps, combined with our Rent vs. Buy Search, and Foreclosure Heat Maps, give consumers the tools necessary to make sound financial and housing decisions in today's volatile marketplace.
We have a unique platform for juxtaposing actual for-sale and for-rent listings with information that lets shoppers know how their target property compares to the surrounding area. This functionality will help shoppers become more informed when making the critical decision of whether renting or buying will leave them better off financially. Shoppers will be less inclined to sink their money into inflated real estate when they are presented with these illustrations of the Rent Ratio Heat Maps, while also being able to identify areas where buying would be a wise decision.
Rent Ratio Heat Maps
The Rent Ratio is an indicator of the stability of home prices, and these Rent Ratio Heat Maps have effectively made HotPads the first to produce an interactive map of the housing bubble.
HotPads' Rent Ratio Heat Maps allow apartment and housing hunters nationwide to visually see where it makes sense for them to rent or buy, based on the ratio of rental and for sale pricing. If the ratio is too high (generally above 20) it is more expensive to buy than rent comparable homes. On the Heat Maps, the Red colors indicate areas where it makes more financial sense to rent, while the blue swatches are areas where it makes more sense to buy.
(Red = Rent) (Blue = Buy)
This new tool will allow users to visualize which states, cities, and neighborhoods have more or less potential for further decline in home sale prices based on the ratio of how much it costs to buy and rent comparable homes in a given area.
This takes the guess work out of choosing where to rent or buy.
For more information about Rent Ratios, check out this New York Times Article or read up on the Wikipedia Article (under 'rent ratio').
Calculating Rent Ratios
HotPads has one of the largest structured databases of real estate listings in the country. To generate these maps, we analyze over 150,000 rentals and 1.5 million for-sale listings and then display them on our proprietary real-estate mapping application.
We analyze our 150,000 rental and 1,500,000 for-sale listings (not including foreclosure data) by state, county, ZIP, and number of bedrooms and then calculate the average rental and sale prices for that size home in that particular area. The by-bedroom rent-ratios are then averaged, weighted by the number of listings, into the final rent-ratio for the area. Then, these results are color-coded to effectively demonstrate the rent-ratio. Areas in which we do not have ample data to provide a useful resource are left unshaded.
In short, the Price-Rent ratio is calculated by dividing an area's median house price by annual rent (Median House Price/Annual Rent )
Sample Rent Ratio Heat Maps
New York City