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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: zonder who wrote (25585)3/14/2005 12:35:14 PM
From: mishedlo  Read Replies (1) of 116555
 
Don't get trapped in a housing bubble
[This is an interesting concept but the prices are from 2001. Is the article that old? Mish]

Your house has a price-to-earnings ratio, just like a stock, and homebuyers who ignore that P/E could be overpaying. Here's how you can reduce your risk.

How to figure a home's fundamental value
Leamer says he can tell because homes, just like stocks, have a price-to-earnings ratio (P/E) that he believes determines their fundamental value. The ?earnings? part of the ratio consists of the annual rent the house could command. Homebuyers can compare current P/Es with historical levels, Leamer says, to get some idea of whether houses in their cities are becoming overvalued.

moneycentral.msn.com
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