A lot of folks are parsing the latest S&P Case Shiller home price report out today, and debating whether some month-to-month increases are proof of home price stabilization nationwide. I frankly think it’s impossible to say anything nationwide, because a lot of different markets are reacting very differently. That may seem an incredibly prosaic thing to say, but I think an awful lot of smart folks often lose sight of that.

I want to focus today on a couple of charts I got from John Burns over at John Burns Real Estate Consulting. He chooses to look at affordability and the Rental Gap (that is how much more or less it costs to own versus to rent) as better indicators of price direction.

First, take a look at the Rental gap:

As you can see, it is now far more economical to own in many of the formerly hot markets than it is to rent. “We're seeing payments now that are the best they've been since we've been tracking this and we've been tracking this since 1981,” says John Burns. “So all those people who maybe missed out on the boom couldn’t afford to buy a home when prices were what they were in 2005 can now get in and buy a home.”

Now look at affordability. This is a tricky chart, but fascinating:

Questions?  Comments?