Flora Fetid, our friendly former neighbor, was visiting, sitting 8 feet away, as currently fashionable. “Fred and I,” she said, “are going to rent out our house when we go to Morocco. We’ll be gone about a year, and it makes sense.”
“Oh my,” I said. “I hear that’s ‘a country of dizzying diversity.’ Will you be on the Atlantic or Mediterranean coast?
“No, idiot,” she said sweetly. “We’ll be continuing our research about families of Newton County and elsewhere along the Kankakee River. Morocco’s the perfect location.”
“Exciting,” I responded. To cover my geographic error, I asked, “For how much will you rent your house?”
“We don’t know,” Flora replied. “How much would you say?”
“Consult someone who knows the market,” I said.
“Oh, come now,’ she smiled. “You’re the guy with all the numbers. What do they tell you?”
“I don’t have the detail about your house and local knowledge necessary for such advice,” I demurred.
“Coward,” Flora challenged. So I opened my laptop, went to Census data for Indiana places and downloaded the median value of owner-occupied units and of rental units in 47 Hoosier places.
“This is very questionable, but it’s easy,” I told Flora. “These data tell us the highest median value for a house was in 2018 in Zionsville at $380,219, as well as the highest median gross monthly outlay for a rental unit was $1,309. (Gross rental includes utilities except phone and cable.)
We take the annual rent (the monthly times 12), divide by the value of the property, and get a figure of 4.1%. With that number you can figure out the rent once you have the property value.”
Flora thought for a moment and said, “I don’t know if our house is as ritzy as the median home in Zionsville. Should I use that 4.1% of my home’s value to set the rent?”
“What is your home’s value?” I asked, knowing it was a very personal question. But she answered without hesitation, “$423,300 is what the county assessor says.”
“Do you believe her?” I asked and again turned to my laptop. “Redfin puts a value of $497,800 on your place, Zillow says $507,600 and Realtor is at $595,300. All of which are higher than the median of Zionsville.”
“I had no idea.” Flora was floored.
“Don’t be surprised,” I cautioned. “One of them says your house has 2,836 square feet and another says 1,936 square feet. Then they come up with monthly rental figures ranging from $2,264 to $3,578.”
“Well, they’re just unreliable,” she growled.
“No,” I soothed. “They’re just like the U.S. Bureau of Economic Analysis: trying their best to figure out the value of the services we receive from all the houses we own across America. It was at the center of my column last week.”
“As if I read it!” And with that cut, the ever-felicitous Flora left.
Mr. Marcus is an economist. Reach him at [email protected]. Follow his views and those of John Guy on “Who gets what?” wherever podcasts are available or at mortonjohn.libsyn.com. Send comments to [email protected].
