A Tale of Six Cities: 1930-2007

Source: Census

The chart shows the ratio of the median house price to the median annual rent paid for six california cities form 1930-2007, using census data together with the American Community Survey. Rents are calculated as median monthly contract rent x12.

You can see both the wage compression period, together with a secular period of expanding multiples (and declining yields). This is due to effects such as Proposition 13, the mortgage interest deduction, longer repayment periods and the introduction of additional subsidies. Don't forget the boom/bust pattern common to California, particularly coastal California, as well as the parabolic multiple increase starting with the 2000 census. The time series ends in 2007, but we can watch it collapse as subsequent surveys are released.