Backyard Aquaponics
A place to discuss aquaponics

I'm starting a new thread instead of hijacking another. It seems futile though. I've had this discussion countless times over the last 4 years with my fellow Americans. Yes, there is a limited supply of land. Yes, people need to live somewhere. These things have always been true, but have nothing to do with land speculation & bubbles. Or valuation.

For those interested, here's another good read from Mish:
Global Housing Bubble - Based on Ratio of Price to Rent, Which Countries are the Bubbliest?
http://globaleconomicanalysis.blogspot. ... io-of.html

Inquiring minds are wondering where the biggest housing bubble is.

In what should be no surprise, the Economist rates Australia #1, followed by Hong Kong, Spain, Sweden, France, and Great Britain. Supposedly, US home prices are undervalued and Japan (having gone through decades of deflation), the most undervalued.

The Economist made its determination on the basis of price-to-rent...

Value compared to rent will only give you a general idea of the bubble areas. You must however consider high job and population areas. I live in the Bay Area of California. During this last bust cycle San Francisco prices remained rather stable while the outlying areas (my area included) went bust. Some houses in my area lost 50-75% value. SF? a moderate 3-5% loss. It's value to rent ratio is terrible (to a property investor). That's not because San Francisco still has a bubble needing to be popped. It's because people want to live there and will pay significantly more to own a piece of it.

What you can do with rent to value ratios is compare a single area over time. If nothing about the area has changed (new manufacturing plants, new military bases, etc.) then you can use it in that area to determine a valuation bubble.

The other stat that will give you an idea of value is that housing should cost 3x the average annual income of the area. I'm sure SF is a high income area but I have no idea what the specifics are. I'm surprised it's only down 5% off the peak though. I do know that option ARMS are about to reset big time.

The Case-Shiller index shows that SF lost way more than 5%. Do you have a link for that? I did read that prices firmed 16% YOY recently but, you know, if you've lost 35% you've got to go up 70% to get back to even.

Oh man - I thought this was going to be about Australian beer!

Exaggerating again - it's actually 54% not 70%

Or perhaps even less... if the value was artificailly inflated in the first place...

+1 DejaVoo
Definitely more interesting than financial bubbles etc although many problems of the world have been solved over a frothy beer, unfortuately many of "good ideas are forgotten the next day

I stand corrected. I was thinking about how if you lost 50% you need a double to get back to even. 54% is quite a bit to make up tho.

I wish prices would drop a bit in Aus, it's just silly at the moment...

I thought this was going to be about beer too. No fair tricking us. "Beer, the solution to and cause of all man's problems." -- Homer Simpson

I've always had problems with price to rent valuation. I prefer price to income in general, but it also has issues. Country to country comparisons are only useful if you're trying to determine risk for pricing mortgage backed securities or looking at macro economic models.

As for individual houses, it's all about the local income the home owner can earn and the emotional value of living in one neighborhood versus another.

^^ unless you live in an area with a hi FIFO (Fly in fly out) work force going to the mines up north.
I know several people on 180K+ working 3+1..

Me too
I hate real estate. It's the single biggest thorn in the side of free market economics.

Discuss

Sorry but "frothiest" was't my choice of words. Maybe they knew it was the only way to catch your attention!

As for "free market economies" there doesn't appear to be one anywhere on the planet at the moment.

I guarantee they won't drop by just a bit. Prices tend to overshoot in both directions.