Business Week in its August 11th, 2008 issue reports on a study tracking the amount of rent paid by tenants to live in a house versus the price of the house were it on the market.  Economists Morris Davis, Andreas Lehnert, and Robert Martin found that the average rent-price ratio from 1960 to 1995 was 5.29%.  The average rent-price ratio from 1995-2006 however, was 3.5%, climbing to 3.93% in the first quarter of 2008.  The article suggests that prices still need to drop to equalize back to the 5.29% rate (see article).

If we look at the 2007 average price for a house in Ulster County $300,742 (as reported by Prudential Nutshell Realty), to match the average rent-price ratio from 1960-1995 of 5.29%, the rent would have to be $15,909 or $1,325 per month.  The 2007 average rent for a 3 bedroom apartment in Ulster County was $1,129 (from the Ulster County Planning Board 2007 Rental Housing Survey).  Note that this average includes 3-bedroom units in apartment buildings, mobile homes, and single family homes.  This average rent of $1,129 is 4.5% rent-price ratio to the average housing price of $300,742.  If the rent-price ratio is a true indicator, then housing prices will still have to fall somewhat to go back to the 35 year average.  Based on a rent-price ratio of 5.29% and a rent of $1,129, the price of the house should be $256,105.