Residential Real Estate Bubble?
(New Article Each
real estate across the country has enjoyed a tremendous Bull Run since
the beginnings of the Bear Market in the US stock market in 2000.
In fact it can be argued that the wave of refinances, and home buying
has been the chief factor in not having the US economy slip into
a deflationary spiral similar to the 1930s.
However, even the best parties come to
an end, and it is likely that the real estate market has seen its better
Just as the stock market has a
gauge for measuring the value of companies based upon the ratio of price
to earnings, one can view real estate with the same perspective. We can
call this the Price to Rent Ratio. Just like the Nasdaq, which
went into unchartered waters in the late 1990's, real estate has now
entered into never before seen levels of valuation.
The chart shows the top of the real
estate market in 1989 with a ratio of 1.33, which resulted in a multi
year depressed real estate market . Currently the ratio is approaching
an extreme 1.45 reading and is in high relativity versus its
historic baseline. Renters are actually getting the most house for the
buck ever these days!
What will be the starting catalyst of a
real estate bear market? When interest rates finally start moving back
up, buyer beware and keep your powder dry.