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The ratio of home prices to rents is usually a good gauge of how well home prices are supported by fundamentals. Many typical rationalizations of high housing prices, such as a growing population and improving job prospects, should boost rents as well, if they are actually legitimate. Unfortunately, this gauge may be less useful than normal in Boston given the existence of rent control until around 1996. I have not researched how widespread rent control was before 1996 throughout the Boston MSA, which is substantially larger than just Boston Proper, so bear that in mind when reviewing the following. With that said, using the S&P/Case-Shiller Index and the "rent of primary residence" series from the U.S. Bureau of Labor Statistics, both for the Boston MSA, the price to rent ratio from 1987 through the present is represented by the following chart:

The U.S. Bureau of Labor Statistics offers multiple data series that could be used for tracking rent: rent of primary residence, shelter, and owners' equivalent rent of primary residence. I waffled between which to use as each has its own advantage. I decided to graph a comparison of all three to see how much it would matter. It turns out that all three series have moved very closely together, so I selected "rent of primary residence" since the difference between the three would not be great and since I think it is the least subjective of the three (owners' equivalent rent is determined by asking owners what they think their home would rent for). Here is the comparison:

Please do try this at home in order to identify any errors. Sources:

The latest version of this report can be found at http://www.bostonbubble.com/latest.php?id=price_to_rent

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