House P/E Ratio
This story ran in today's NY Times. For whatever reason, the media has really started to play up the housing bubble. As I said in previous posts, the Wall Street Journal has been busy writing about the bubble for two weeks straight now.
"While gleeful about their apparent riches, homeowners in many of the hottest areas are also growing concerned. How, exactly, does one know if the family palace is sitting atop a bubble about to burst?
The answer might have less to do with the sale price of your neighbor's house and more to do with something most homeowners ignore: the local rental market.
The easiest way to gauge a home's value is to borrow a tool from the stock market. In the most basic method of analyzing a stock, investors look at its price-to-earnings ratio, a comparison of a company's share price with its annual profit. The higher the ratio, the more expensive a stock is relative to its underlying value."
"While gleeful about their apparent riches, homeowners in many of the hottest areas are also growing concerned. How, exactly, does one know if the family palace is sitting atop a bubble about to burst?
The answer might have less to do with the sale price of your neighbor's house and more to do with something most homeowners ignore: the local rental market.
The easiest way to gauge a home's value is to borrow a tool from the stock market. In the most basic method of analyzing a stock, investors look at its price-to-earnings ratio, a comparison of a company's share price with its annual profit. The higher the ratio, the more expensive a stock is relative to its underlying value."
posted by Little_Silvered at 5:54 PM
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