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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: ChanceIs who wrote (94808)	11/15/2007 10:09:33 PM
From: DebtBomb	Respond to of 306849

It is sad. Here's all anyone needs to know about real estate....at least for now. Real Estate: Buy, Sell, or Hold? But once the fervor fades, prices must fall to restore their normal, long-term relationship with rents. Rents exercise a kind of inevitable gravitational pull on prices. The ratio of prices to rents "behaves much like price/earnings ratios for stocks," says Yale economist Robert Shiller. "Like P/Es, price-to-rent ratios are mean-reverting." In other words, while prices soar from time to time, sending the ratio to exceptional heights, sooner or later the relationship is bound to return to its historical average. So what are rents saying about home values today? To answer that question, Fortune worked with Moody's Economy.com to estimate adjustments needed to get prices and rents back in balance. We'll go into detail below, but the headline is gloomy: According to our calculations, prices in most markets will fall by double digits over the next five years. finance.yahoo.com