House prices keep falling. Millions of foreclosed homes have yet to hit the market. But by at least one measure, there's reason to believe the bottom may be near.
Thanks to lower home prices and higher rents, the return one can reap by buying and renting out a home has risen to a level last seen well before the housing boom. Economists at Goldman Sachs estimate that the average U.S. rental yield stands at about 6.3 percent, up from 4.8 percent at the peak of the boom and higher than 2000 or even 1990.
Some of the highest rental yields can be found in areas hardest hit by the housing bust. In Las Vegas, for example, the average is about 8.6 percent. By contrast, the average in New York is a meager 4.3 percent.
The trend in rental yields is promising on a couple different fronts. For one, it suggests investors should be interested in buying foreclosed homes, particularly in those areas where the supply is likely to be strong as banks and mortgage firms Fannie Mae and Freddie Mac move ahead with plans to sell their inventories of repossessed properties. That can help support prices.
Beyond that, if higher yields encourage investors to put more properties on the market, that could take some of the upward pressure off rents, which have been a driver of inflation in recent months.
To be sure, markets have a habit of overshooting. In this case, that means house prices might have to fall a lot more -- and rental yields rise well above historical averages -- before people get interested in buying again. At the very least, though, there are already some good deals out there.
(Mark Whitehouse is a member of the Bloomberg View editorial board.)
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