Price-Income ratios, based on both disposable and per capita disposable income point to moderate gains in the last three months as home prices continue to advance. A comparion of buying and renting shows that the ratio slightly favors buying compared to the average market condition since 1987, leaving room for further gains in housing. The charts show these relations.
Price to income uses the S&P/Case-Shiller 10-City Composite seasonally adjusted and seasonally adjusted data for disposable personal income and per capita disposabale personal income. “Disposable” means after federal income taxes; per capita divides income by population to correct from increases in income due to increased population. The Rent-Buy comparison uses the Consumer Price Index series for rent of a primary residence to measure rents and the S&P/Case-Shiller 10-City Composite to measure home prices; both series are seasonally adjusted.